Cryptocurrency, a term that has gained popularity recently, is a digital payment system that doesn’t need banks to certify transactions. Crypto mining has become one of the many trending words of the century. China has been doing very well in the crypto industry. In April, China had acquired two-third of the Bitcoin mining market. But now, it has decided not to participate in crypto mining at all, as of July 2021.
As to what crypto mining is, it is the process by which new cryptos are added into propagation by solving exceptionally complicated computational mathematical problems. The first computer that solves these problems is rewarded with Bitcoin. After this, the same process continues.
However, cryptocurrency mining is quite laborious and expensive. Also, gaining rewards through this process is very unpredictable. This is why not all countries practice crypto mining. The major countries that do crypto mining are the United States, Kazakhstan, Russia, etc.
China had done reasonably well in the crypto mining sector and was the leading country. The main reason for China being the epicenter for crypto mining is that the energy or electricity used in computers for crypto mining purposes is comparatively cheaper in China. But now, since it has banned crypto mining, the US is leading the sector. Its ban caused the price of Bitcoin to drop down by 2.9% in a day. However, the ban came into force in July 2021. But some companies continued their crypto-related businesses after the enforcement. Hence, China has acquired some strict measures this time.
Why indeed did China ban Crypto mining?
Now arises the most crucial question, “Why indeed did China ban Crypto mining, although it was capturing a large part of the industry?” There may be many answers to this question, given by various experts in this field. But the dominant reason, on which almost all the experts will agree, is that cryptocurrency mining consumes a lot of energy. The Crypto mining industry is mainly powered by coal. Since most of China’s energy comes from coal, this has caused a rise in energy demand. Currently, no country can afford a hike in energy demand. The crypto mining process also causes a lot of pollution due to an increase in carbon emissions. And after all, China has taken an oath to become ‘carbon neutral’ by the year 2060. The Crypto mining ban is just a step on this path. China has planned to take other steps in this direction as well and cut its energy intensity.
Another reason for this ban is that an unidentified currency does not intrigue the Chinese bureaucrats much. They continuously observe their currency and are watchful regarding the money that travels in and out of the country. Hence, they are not very much moved by cryptocurrency.
Although this does not mean that China will leave the crypto market, China has just banned crypto mining and not the currency itself. This means that cryptocurrencies such as Bitcoin will be dealt with freely in the markets of China. China also remains the biggest producer of mining equipment. This proves that China will not evacuate the crypto industry so easily. Especially now that China’s Central Bank released a digital Yuan that could compete with crypto, all this and more at https://yuan-paygroup.com/.
Effect of China Banning Crypto Mining?
The ban is beneficial for other countries as now the crypto miners are seeking opportunities at other places. Crypto mining equipment needs a cooler environment, and consequently, cooler countries like Kazakhstan and Russia are the most suitable places for it. China needed cooling appliances for this purpose, which will not be a problem for these countries. But crypto mining process requires regular energy, which is not readily available in Kazakhstan as well as Russia. Thus, the US seems the perfect place for such miners.
This step of China has also made it difficult for new tech firms to establish themselves in China because of the number of laws and regulations. This ban has caused a lot of people to criticize China. But China says that it will do whatever is right for its economy. Keeping all the factors in mind, we can say that China has enforced this ban mainly because of environmental reasons.
Masab Farooque is a Tech Geek, Writer, and Founder at The Panther Tech. He is also a lead game developer at 10StaticStudios.
When he is not writing, he is mostly playing video games