A few months ago, the crypto industry was shaken up by the news of the mass exodus of miners from China. At the end of May 2021, it became known that the Chinese authorities were going to ban Bitcoin (BTC) mining, bringing the already existing regulatory pressure on miners to a breaking point.
The list of banned operations includes purchasing cryptocurrencies, as well as any related investment activities, crypto trading and exchange. The People’s Bank of China had held substantive consultations with banks and payment systems and then the largest Chinese financial institutions were told to stop speculative trading — in particular, with BTC.
As a result, Bitcoin’s hash rate showed one of the largest drops in its history. China’s share of BTC mining dropped 55% since the beginning of the year, as many Bitcoin network participants turned off their equipment.
This was confirmed as China’s secondary market filled with GPU cards. Miners were actively selling cards, including the all-powerful GeForce RTX 3090 and Radeon RX 6900 XT at below-market prices.
Of course, not all miners capitulated, especially the large pools. The logical way out of the situation was “mining migration” to other countries. But where did the Chinese miners move to, and which countries can become the new mecca of mining?
Is mining truly bad for China?
Before trying to find out where the miners are leaving, it is worth understanding why the Chinese government banned mining, and what consequences such a decision will have on the crypto industry and even on some sectors of the country’s economy.
After the introduction of the ban, the largest mining pools were the first to react. Huobi, BTC.TOP and HashCow have ceased their activities in whole or partially. One of the largest crypto exchanges in the country, Huobi, suspended both crypto mining and some trading services for new clients from mainland China.
Mining company BTC.TOP announced it was suspending its business in China, citing risks, while HashCow has said it will stop buying new BTC mining stations.
The largest producer of Bitcoin mining equipment in the world, Bitmain, temporarily suspended sales at the end of June 2021. The company made this decision after prices plummeted by 75%. The suspension affected only BTC miners, while Bitmain continues to sell the equipment for altcoin mining.
According to the Chinese government, the problem in mining was the high consumption of electricity. China, which was home to most of the BTC mining pools, relies mainly on coal power, which produces a lot of pollution.
But according to some commentators in the crypto industry, the real motive of the Chinese authorities was not to preserve the country’s ecology but to promote its own cryptocurrency, the digital yuan — i.e., by banning BTC mining, the Chinese government “clears” the space for its own central bank digital currency (CBDC).
Now the development of the digital yuan is in full swing. At the end of June 2021, subway passengers in Beijing were able to buy tickets using the digital yuan. And two weeks earlier, the Agricultural Bank of China was the first in the country to allow its clients to convert digital yuan into cash and vice versa.
At the same time, the government appears to be actively suppressing competitors to the CBDC. In 2020, the initial public offering of Ant Financial — Alibaba’s fintech business — was thwarted largely due to Chinese authorities’ fears that the Alipay payments system would compete with the digital yuan.
So, is it possible that miners were simply collateral damage on the way to the country’s goal to support the widely implemented digital national currency? After all, the latest crypto ban did not prohibit anything new, as existing restrictions were already spelled out in 2017.
New mining centers
China, where three-quarters of all BTC used to be mined, began to reduce its share in global mining long before the prohibitive measures were introduced in…