The authorities have decided to act after finding that the rise in electricity consumption of server farms underlying Bitcoin and other tokens has been a key driver of the growing demand for coal in parts of China, according to a person who participated at high-level government meetings on the issue and asked not to do so. be identified by discussing private information.
Growing demand for coal has prompted some producers to restart idle mines without official approval, resulting in higher safety risks and an increase in fatalities this year, the person said.
While the central Chinese government has imposed a strict ban on trading in digital assets and discouraged crypto mining for years, authorities in some remote areas of the country have been more welcoming to the industry because it generates much-needed income. About 65% of global Bitcoin mining took place in China in April 2020, according to a University of Cambridge estimate.
Rising Concerns Over Environmental Ripple Effects Help Explain Why China Financial Stability and Development Committee said on May 21 that it would crack down on crypto mining and trading, which amounted to one of the government’s strongest condemnations to date of the crypto ecosystem.
The warning fueled a the sale of cryptocurrencies at record highs and has fueled a debate on how investors should respond to the environmental costs of digital assets. Thoughts on the question of Tesla Inc. founder and crypto advocate Elon Musk have in turn destroyed and has hinted at billions of dollars in market value in recent weeks. According to a estimate, every dollar of Bitcoin value created in 2018 was responsible for $ 0.37 in health and climate damage in China and $ 0.49 in the United States.
Bitcoin has fallen about 40% since mid-April, facing an epic wave that has drawn everyone from Wall Street pros to mom-and-pop investors in Seoul. The largest cryptocurrency was trading at $ 39,293 at 10:35 am Hong Kong time.
The National Energy Administration and China’s National Development and Reform Commission did not immediately respond to requests for comment.
Unraveling the impact of crypto mining on coal consumption in China is not easy, especially during times of economic recovery when demand for electricity grows more widely. But in regions like Xinjiang and Inner Mongolia, which have long been the industry’s favorite destinations, Chinese authorities have established a direct link between crypto and coal.A preliminary government inquiry into a An accident that trapped 21 people in a coal mine in Xinjiang last month revealed that the mine had been restarted without official permission to help meet the growing demand for energy from crypto server farms, a person with knowledge said. of the probe who asked not to be named discussing private information. There has been no official update on the status of the trapped coal miners since the state-run Xinhua News Agency reported in early May that a rescue team had entered the mine.
Xinjiang alone accounts for nearly 36% of Bitcoin’s mining capacity, according to Cambridge estimates. That’s thanks to cheap coal-fired electricity, low temperatures that keep mining rigs cool, and underdeveloped power grids that sometimes lead to oversupply.
Some observers are skeptical of China’s emissions promises, but the country’s top leaders have pledged to make tackling climate change a priority despite the potential economic slowdown in the near term. At a climate summit last month hosted by Joe Biden, Xi reiterated China’s plan to peak carbon emissions by 2030 and achieve net zero status. by 2060, in part by reducing coal consumption.
For a Chinese government wary of the anonymity, volatility, and borderless nature of digital assets, crypto-miners are an obvious target. Regulators across the country have long warned that cryptocurrencies can facilitate money laundering, fraud and terrorist financing.
While previous efforts to curb crypto mining have failed to gain traction locally, there are signs that could change. Inner Mongolia, which banned crypto mining in April, said Tuesday he plans to increase penalties for businesses and individuals and discipline government officials who help the industry. Last week, the region said it had a system in place to whistleblowers to report anyone who violates the ban.
– With the help of Alfred Cang, Heng Xie and Jing Zhao