"Going overseas" is premature; are miners waiting for details?

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Many miners told reporters that it is too early to talk about "going overseas," as the conference has just been held and most miners are still in a wait-and-see mode, looking forward to more detailed policies being introduced.

This article was published in the Science and Technology Innovation Board Daily, authors: Feng Jun, Xu Cihao.

On May 21, Vice Premier Liu He presided over the 51st meeting of the State Council Financial Stability Development Committee to study and deploy key work in the financial sector for the next phase. The meeting emphasized cracking down on Bitcoin mining and trading activities, and firmly preventing individual risks from spreading to the social sphere.

As a result of this news, Bitcoin and cryptocurrencies experienced a widespread waterfall decline. Notably, this is the first time the central government has explicitly proposed a "rectification" of Bitcoin mining, causing the entire "mining circle" to erupt. B.TOP mining pool and Huobi mining machine mall announced their decision to stop providing mining machine purchasing services for customers in mainland China.

Several industry insiders analyzed to the Science and Technology Innovation Board Daily that under tightening regulations, large mining farms and pools will face the greatest impact; it is possible that, similar to the "94" document issued in 2017, a large number of miners and computing power will shift overseas.

However, many miners told reporters that it is too early to talk about "going overseas," as the meeting has just been held, and most miners are still in a wait-and-see state, looking forward to more detailed policy announcements.

Successively Closing Mainland Services

Yesterday, a chat screenshot from a "Huobi Mall customer service" circulated online, stating that to comply with China's latest industry regulatory policies, the mall has decided to suspend providing mining machines and derivative services to users in mainland China; for users who have purchased BTC mining machine products (including "mining machine + hosting," "one-stop," "worry-free mining"), the hosting service will be suspended, and the machines will be taken offline starting today (23rd).

Reporters from the Science and Technology Innovation Board Daily confirmed from multiple independent sources that this rumor is true. Huobi responded that since the beginning of this year, the global development pace of the mining machine mall business has been accelerating, and to focus on expanding overseas business, the mining machine mall has decided to suspend related services for users in mainland China. Solutions for the mining machines held by old users will be communicated to customers later.

On the early morning of May 22, B.TOP mining pool founder Jiang Zhuoer issued a statement on social media, deciding to stop providing mining machine purchasing services for customers in mainland China.

In response, Jiang Zhuoer stated that the new policy from the State Council Financial Stability Development Committee has the most obvious impact on large mining farms, but he predicts that Bitcoin mining will continue, only that the main body of mining in China will shift from large-scale farms to home miners and small miners.

On the same day as B.TOP, a relevant person from Mint Mine also announced that they have laid out plans in Canada and Kazakhstan.

Is Bitcoin Really Energy-Intensive?

"Mining" is jargon in the Bitcoin world, specifically referring to the use of chip computing power to continuously perform "hash collisions" in the blocks generated by the Bitcoin system to win the right to record transactions and thus obtain Bitcoin rewards from the system. This tedious and repetitive process is vividly referred to as "mining" in the Bitcoin industry.

During the "mining" process, the largest expenditure is the initial investment in mining machines and the enormous electricity consumed during their daily operation. To reduce production costs, Bitcoin mining farms mostly "live where the electricity is."

Under the global trend of carbon neutrality, the energy consumption issue of Bitcoin has also been pushed to the forefront. So how energy-intensive is Bitcoin?

Recently, the Financial Times published a feature article titled "Dirty Money: The Growing Bitcoin Energy Consumption Problem." The article mentioned that the latest calculations from the Cambridge Centre for Alternative Finance (CCAF) suggest that Bitcoin mining consumes approximately 133.68 terawatt-hours of electricity annually—this estimated figure, based on the best guesses, has been rising over the past five years. This makes Bitcoin's electricity consumption slightly higher than Sweden (which had an electricity consumption of 131.8 terawatt-hours in 2020) and second only to Malaysia (147.21 terawatt-hours).

However, the actual electricity consumption figures for Bitcoin could be much higher. The rising price of Bitcoin attracts new miners who use older, less efficient equipment for mining.

China's Bitcoin mining activities are the most active in the world. According to data from the Cambridge Centre for Alternative Finance (CCAF), China's Bitcoin mining computing power accounts for 65% of the global total.

In mining activities, the most significant cost is the electricity required to operate the "mining machines," which is why "mining farms" are usually located in areas with abundant and cheap electricity, such as Xinjiang and Inner Mongolia with rich thermal power, as well as Yunnan, Sichuan, and Guizhou with abundant hydropower. Among these, Xinjiang alone accounts for 35% of the national Bitcoin mining computing power.

On April 6, a paper titled "Carbon Emissions and Sustainability Policy Assessment of Bitcoin Blockchain Operations in China" was published in Nature Communications, stating that without any policy intervention, the carbon emissions from Bitcoin mining in China would rank among the top ten in 182 domestic cities and 42 major industrial sectors, accounting for approximately 5.41% of China's carbon emissions from electricity generation, with the carbon emissions per capita GDP in the industry reaching 10.77 kg/USD.

"After the publication of the paper 'Carbon Emissions and Sustainability Policy Assessment of Bitcoin Blockchain Operations in China,' the policies for China's Bitcoin mining industry tightened rapidly." Liu Changyong, director of the Blockchain Research Center at Chongqing Technology and Business University, believes that the main regulatory drive in the country comes from "carbon emissions and carbon neutrality" policies.

Waiting Miners

"The industry's development overseas has become a consensus in the industry; previously, there was a tendency to lean towards ultra-low electricity price regions, but after encountering policy risks in places like Iran, the recent trend has mainly shifted to North America, where policies and energy are relatively stable," Liu Changyong told the Science and Technology Innovation Board Daily.

After the issuance of the "94" document by five ministries in 2017, the vast majority of domestic exchanges were closed, and they began to seek development opportunities overseas. Liu Changyong pointed out that since 2020, the mining industry has also been laying out overseas, and with the recent tightening of regulatory policies, mining will accelerate its shift to North America.

In fact, as early as January 2018, the Internet Financial Risk Special Rectification Work Leading Group Office issued a document requiring local governments to guide mining enterprises in their jurisdictions to exit in an orderly manner.

In April 2019, the National Development and Reform Commission published the "Guiding Catalogue for Industrial Structure Adjustment (Draft for Comments)," categorizing virtual currency mining as an industry to be eliminated, but in the formal version released that year, mining was removed from the elimination list.

On May 18 of this year, the Inner Mongolia Development and Reform Commission announced the establishment of a reporting platform for virtual currency "mining" enterprises, fully accepting complaints and reports regarding issues with virtual currency "mining" enterprises.

Until May 21, the State Council Financial Stability Development Committee held a meeting, clearly stating the intention to "crack down on Bitcoin mining and trading activities."

An anonymous mining industry insider analyzed to the Science and Technology Innovation Board Daily that if this policy is implemented, small miners will basically move to cloud computing, and only cloud computing will remain in the country; while large miners and listed companies represented by Wu Jihan, Jiang Zhuoer, and 500.com will go overseas.

"The state is actively guiding the mining industry and has been working hard to effectively utilize mining. The financial committee's policy is actually aimed at financial stability and protecting investors' interests," the insider stated, "Everyone is now waiting for specific regulatory implementation. If the policy is 'one-size-fits-all,' many mining farms will actually turn underground, making it even harder to protect investors."

Multiple miners and related individuals told the Science and Technology Innovation Board Daily that miners are generally still in a wait-and-see state, awaiting more policy news, as there have not yet been detailed documents released.

Liu Changyong, director of the Blockchain Research Center at Chongqing Technology and Business University, emphasized that the tightening of policies is nationwide, with Inner Mongolia taking the lead, and recent policies in Sichuan also tightening; overall, if there are no significant changes in policies, the prospects for domestic mining development are concerning.

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