You might not expect it from an authoritarian state, but China was one of the first countries where cryptocurrency was accepted as a means of payment. In 2013, back when the Bitcoin price was a lot lower than now, you could already use your BTC to donate to a charity fund. Many companies followed suit with accepting payments in crypto. Baidu, the Chinese search engine, accepted cryptocurrency for security service offerings for a while too. Not only when it comes to accepting Bitcoin ;as a payment method, China was a frontrunner in the crypto world, this is also the case when you look at mining.
Role of mining in China
Mining has been popular in China since the dawn of cryptocurrency. There are currently 50 large mining farms active in this massive Asian country. Through mining, transactions are verified and added to the blocks with transactions in a blockchain. In China, mining of Bitcoin (BTC) in particular was big business. Until recently, Inner Mongolia and Xinjiang were the main mining regions of China. The first generation of miners have also become very rich from mining. Before March 2021, the government had no real active policy on mining. Local authorities however sometimes wanted to stimulate mining because it created employment. Various state enterprises have also become owners or co-owners of mining farms over time. This policy is starting to change now.
Importance of Chinese miners
China has always been a major export and manufacturing country and it takes on this role in the crypto world as well. After all, China is the country that takes care of most mining. In total, China will be responsible for nearly 80 percent of Bitcoin mining in 2021. Therefore, the Chinese miners are extremely important in this industry. In fact, the crypto world simply cannot go ahead without the mining farms spread across China. If these farms were not around, the Bitcoin price would have been way lower for example. Some other coins can’t be mined. So for example the Cardano price and also the Ripple price have no exposure to Chinese mining.
Will it stop?
In March 2021 it was announced that the mining of crypto must be stopped in the Inner Mongolia region. The latest news is that there will also be a hotline in China here where citizens can report if they suspect that mining is taking place somewhere. Why does the government want to restrict mining? As Elon Musk tweeted, the Chinese government is concerned about the large amount of energy that mining takes. More than 40 percent of the energy for mining in China is obtained from highly polluting coal combustion. In China, sustainability has been high on the agenda for some time, so mining with high, usually polluting, energy consumption does not fit within these plans. It is not only the mining industry that is being curbed in Inner Mongolia. Restrictions are also imposed on the production of PVC, steel, coal and methanol in order to reduce pollution. If crypto mining will fully disappear from China is hard to say, but it certainly has to be more sustainable and environmentally-friendly.