The new steps from Beijing were unveiled late on Friday. They roiled crypto markets over the weekend and pushed crypto miners to suspend some business in China, creating uncertainty about a critical step in the process needed to put more of these coins in circulation.
Chinese Vice Premier Liu He told a group of finance officials on Friday that the government would “clamp down on bitcoin mining and trading activity” as part of its goal to achieve financial stability. The government didn’t elaborate on specific policies targeting mining or trading.
While China has taken steps to restrict the use of cryptocurrencies for years, the focus on “mining” is new. The presence of Liu and other high-ranking cabinet members at the meeting, along with steps taken earlier last week to widen a clampdown on cryptos, indicate that the Chinese government is getting more aggressive about its approach.
Major crypto miners took notice. HashCow — which owns the world’s largest mining farms — said Saturday that it would stop selling machines to clients in China and refund anyone who already paid for a machine but did not receive it. (It added, though, that it would maintain existing crypto mining machines.)
“We will actively support all kinds of laws and regulations in the country to avoid regulatory risks,” the Chinese company said.
Another Chinese mining company, BIT.TOP, said it would no longer offer mining services for clients in mainland China.
“Next, we will mainly mine in North America,” wrote Jiang Zhuoer, CEO of BIT.TOP, on his Weibo account on Saturday. “It’s not worth running the regulatory risk.”
The computers necessary for that process are run by companies like HashCow and BIT.TOP. China accounts for more than 75% of bitcoin mining around the world, according to research published by the peer-reviewed journal Nature Communications last month.
In his Weibo post, Jiang of BIT.TOP said Friday’s meeting suggests that the government is trying to prevent a massive flow of capital into crypto mining, but individuals should still be allowed to mine on their own. He expected that half of the country’s mining machines could be suspended as a result of the latest actions, because the clampdown is focused on big mining farms.
Bitcoin and shares in crypto-related companies were shaken after China’s move.
Bitcoin prices fell as much as 13% on Sunday. The currency was last trading at around $36,000 per coin — far below the peak of $64,000 it reached a month ago, according to CoinDesk.
Shares of Chinese crypto mining firm BIT Mining plummeted 23% in New York on Friday. And Huobi Technology, a crypto exchange, plunged 22% on Monday in Hong Kong. Huobi, which provides miner hosting and other crypto-related products, said Monday that it would suspend services related to mining for new users in mainland China “to be more focused on the expansion of our overseas presence.” It added that most users would be unaffected by the change.
“Huobi always strives to abide by the evolving policies and regulations of each jurisdiction to adhere to risk and preserve the well-being of our users and their assets,” the company added.
“China once again showed who was the big fish, signaling a clampdown on crypto miners,” wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, in a Monday note. Regulatory risk “now represents an existential threat to the virtual currency space,” he added.
The new measures aren’t just about curtailing financial risk. The computers needed for bitcoin mining eat up a ton of computing power and electricity, raising concerns about the cost to the environment.
In China alone, bitcoin is projected to generate more than 130 million metric tons of carbon emissions by 2024, according to the Nature Communications study. That’s more than the total annual carbon emissions output from the Czech Republic and Qatar in 2016.
— Jill Disis, Alexis Benveniste and Anneken Tappe contributed to this report.