In a recent move to tighten regulation of cryptocurrencies such as Bitcoin, the Beijing Municipal Bureau of Economy and Informatization issued an “emergency notice” on April 27, requiring data centers in the city to report cryptocurrency mining and related data within a specified period of time.
The notice also required the reporting of electricity consumption and total energy consumption ratio for the past year. However, when a media inquiry was made to the bureau regarding the results, no response was received. The bureau also did not explain why the operation was so “urgent”, saying only that the mining situation was being sorted out for the normal business work of the relevant departments.
This approach by Beijing seems to be in implementation of the central bank’s (People’s Bank of China) deputy governor Li Bo’s request. He spoke at the Boao Forum for Asia on April 18 that the bank is studying rules for regulating cryptocurrencies such as bitcoin and stablecoins.
Li Bo said cryptocurrencies such as bitcoin are not currencies per se, but crypto assets, an investment option that still must have regulatory rules to ensure that speculation in such assets does not cause serious financial risks.
Bitcoin soars in value as countries dare not underestimate
Cryptocurrencies, represented by Bitcoin, have attracted increasing attention in recent years for their security, secrecy and decentralization, with the value of Bitcoin and other major cryptocurrencies trending upward amid significant fluctuations. In recent months in particular, the value of multiple cryptocurrencies has soared, driven by Bitcoin, and the total market capitalization has now soared from a few hundred billion dollars to 2.5 trillion dollars.
Data shows that Bitcoin’s unit price once topped $60,000; despite a recent drop in value, as of May 9, Bitcoin’s unit price was still as high as $58,600, with a market cap of $1.1 trillion.
As existing cryptocurrencies soar and more and more new ones are added, the impact of cryptocurrencies is increasingly daring countries and multinational consortia and institutions around the world to underestimate.
Yu Jianing, the rotating chairman of the Blockchain Special Committee of the China Communications Industry Association, believes that “it is inevitable” that the Chinese Communist Party authorities will definitely have stricter regulations on cryptocurrencies.
Chinese are keen on mining 70% of the world’s
Although Chinese Communist authorities ban the trading of cryptocurrencies such as Bitcoin, they do not ban the mining of cryptocurrencies. Chinese miners make up the majority of the bitcoin mining industry. According to a paper published by several Chinese academics in Nature Communications on April 6, Chinese miners account for more than 75 percent of the computing power of the Bitcoin network.
According to a study cited by Deutsche Welle, China accounts for 70% of the total energy consumption spent on bitcoin mining, based on the amount of electricity consumed during the mining process.
According to a study published in February in a Chinese media outlet, at least 60% of the network’s computing power is in China.
Mining, in the case of Bitcoin, is the process of putting computing power into a computer and receiving Bitcoin as a reward and transaction fee when it is confirmed by a proof mechanism. According to this study above, the daily revenue of the bitcoin mining industry on February 21 of this year could be as high as 380 million yuan ($58.8 million).
In the mining process, computers not only consume a lot of power to operate, but operators also need to constantly update and develop supercomputers for mining to increase their computing power, and there are a variety of ASIC mining machines on the market. The formula for calculating the benefit of mining is: benefit = value of cryptocurrency obtained – (electricity used + cost of mining machine).
Chinese mining not only accounts for a large share, but the mining machine manufacturing is also developing rapidly. Two bitcoin mining giants, Jia Nan Technology and Yibang International, have listed on the U.S. stock market in 2019 and 2020.
Bitmain, a Chinese supplier of integrated circuits and equipment for bitcoin mining, has placed an order with Taiwan chip manufacturing giant TSMC for the highest-end 5nm chips available, and production is expected to begin in the third quarter of this year, according to Chinese Communist Party media.
Chinese Communist Party Wants to Grab the Power of Speech
At the National People’s Congress in March, the CPC explicitly proposed to “build a new advantage in the digital economy” and “actively participate in the formulation of international rules and digital technology standards such as data security, digital currency, and digital taxation”.
The CCP hopes that the digital economy, including blockchain, will contribute to China’s GDP and turn the CCP into a “global leader”.
Blockchain technology, which originated from the Bitcoin trading mechanism, is a technology that manages and protects data through encryption and decentralization. Currently, blockchain technology is mainly used in cryptocurrencies, including Bitcoin.
According to China expert Li Yanming, on the one hand, Xi Jinping, general secretary of the Communist Party of China (CPC), strongly advocates blockchain technology to take control of the discourse in the future of global digital technology. The decentralized concept of blockchain technology, such as cryptocurrencies, runs right up against the totalitarian and authoritarian nature of the CCP, so the CCP will definitely tighten regulation on cryptocurrencies.
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