In September of 2021, news that China was banning the trade of cryptocurrency within its borders hit the airwaves, and many investors grew uncertain of how this would affect decentralized currency in the rest of the world. Just a few months prior to this ban, in April of 2021, it was found that China was responsible for 47% of cryptocurrency mining in the world. In contrast, the United States trailed behind at a distant second that same month, hosting just 16.8% of the world’s mining operations.
So, it might seem at first that with China’s crackdown on crypto, the world of decentralized currency would be set for a lot of turbulence. However, some surprising benefits have come from the nation’s decision to ban crypto trading, including a greater push towards renewable resources for mining operations as miners look elsewhere.
A confusing element of the Chinese crypto ban is that while trading cryptocurrency may now be prohibited, China is far from uninvolved with cryptocurrency overall. Even with the trading ban in effect, the PRC is still the largest producer of cryptocurrency mining equipment in the world.
A confusing element of the Chinese crypto ban is that while trading cryptocurrency may now be prohibited, China is far from uninvolved with cryptocurrency overall.
Also, while there might technically be a ban on mining crypto in some provinces of China, some of the crypto mining equipment produced within China’s borders is still being used there. Many rural and outlying areas of the nation, such as Mongolia, are still seeing significant underground mining activity despite the ban. Some estimate that as much as 20% of the world’s cryptocurrency mining is still taking place in China in underground operations, despite its citizens inability to trade it.
However, most of the remaining mining rigs are now operating at a much smaller scale than before, and many of these miners are in the process of moving their rigs to places with no such bans in effect, such as Kazakhstan. Some miners even moved stateside to places like Texas to restart their operations. In doing so, miners have given themselves an opportunity to move towards a more eco-friendly business model.
The Central Bank of China announced on September 24, 2021 that cryptocurrency trading would henceforth be illegal for Chinese citizens and nationals. However, China wasn’t exactly alone in taking a harder look at cryptocurrency in 2021, even if their verdict was more extreme than that of many other nations. US lawmakers have been discussing ways to regulate cryptocurrency for years, including through proposals in the Build Back Better bill that would add such stipulations as increased reporting requirements for crypto brokers, and increased taxes. Countries like India, meanwhile, have been at least considering following in China’s footsteps and restricting or outright banning cryptocurrency for quite some time.
Ultimately, the decision to ban cryptocurrency trading altogether came down to concerns about potential fraud and money laundering.
For many people, the news of China’s decision to ban cryptocurrency trading was no surprise. After all, Chinese officials have been at least somewhat wary of cryptocurrency for quite some time. Banks in the PRC have been prohibited from processing or holding Bitcoin since 2013, and in 2017 the nation banned initial coin offerings, which is a form of startup funding similar to an initial public offering.
Ultimately, the decision to ban cryptocurrency trading altogether came down to concerns about potential fraud and money laundering. In an official statement, The Central Bank of China said that cryptocurrency, “seriously endangers the safety of people's assets.”
Oddly enough, China’s ban may be a net gain when it comes to the environmental impact of cryptocurrency. For context, China’s economy is developing quickly, but much of the nation is still using an obsolete and inefficient power grid that runs largely on non-renewables like coal.
Because so many miners have moved elsewhere in the wake of the ban, opportunities for restructuring mining rigs to use renewable energy are popping up.
Though Chinese officials have announced plans to go carbon neutral by 2060, the large, densely populated nation has a long way to go before the majority of its energy comes from renewable sources, and the infrastructure will need to be revolutionized in order to do it. Bitcoin mining’s heavy presence in China hadn’t exactly helped these efforts. Mining requires a significant amount of energy per transaction, and environmental activists have noted that the emissions from Bitcoin alone often dwarf those of entire nations. With so much power in China being diverted to Bitcoin mining operations, efforts to reduce the country’s emissions began to stall. The move from coal to renewable energy is a slow and costly one, and as miners popped up more and more across the country, China began to see heavy tolls on its developing energy grid. Simply put, China couldn’t restructure its electrical grid to use renewables and support such an energy-heavy operation at the same time.
Because so many miners have moved elsewhere in the wake of the ban, opportunities for restructuring mining rigs to use renewable energy are popping up. Interestingly, Texas is quickly becoming a haven for crypto miners, particularly in the western region of the state where there is a considerable presence of wind and solar farms. Crypto enthusiasts and entrepreneurs are looking to this region to serve as the pioneer of a new, greener crypto economy, including the mining company, Lancium. In a bold move, Lancium recently announced that it had raised $150 million to build bitcoin mines that will run on renewable energy across the state of Texas.
As both the energy grid and cryptocurrency itself undergo radical changes, it seems inevitable that cryptocurrency miners and blockchain engineers will continue to find new ways to embrace and pioneer new eco-friendly technologies.
Much of the research and inquiry into cryptocurrency’s environmental impact focuses on Bitcoin, and for good reason. Not only is it the most popular decentralized currency with the biggest market share, it’s also the one that uses by far the most power per transaction. But it’s not the only option out there, and the newer options on the market are trending towards green technology.
Bitcoin’s operating model, Proof-of-Work, has since been abandoned by many newer cryptocurrencies in favor of the smoother, more efficient Proof-of-Stake model for newer cryptocurrencies, such as Ethereum. It’s not just a small increase in energy efficiency, either. The Proof-of-Stake coin Cardano, for instance, is known as the most energy efficient coin on the marketplace right now. Cardano is a staggering 1.6 million times more energy efficient than Bitcoin. As both the energy grid and cryptocurrency itself undergo radical changes, it seems inevitable that cryptocurrency miners and blockchain engineers will continue to find new ways to embrace and pioneer new eco-friendly technologies.
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