Reports have emerged detailing the alleged forceful cessation of large-scale bitcoin mines in China’s southwest, with insiders quoting a lack of state-sanctioned regulatory policy regarding cryptocurrency mining as the official reasoning cited for such.
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The Closures Come at a Critical Moment for Mining Businesses, as Bitcoin’s Price Has Tripled over the Course of 2017
The absence of government-backed regulation over the practice of bitcoin mining has apparently prompted the Chinese central government to forcefully influence the cessation of many commercial bitcoin mining operations in Sichuan.
China’s province of Sichuan has attracted great interest from bitcoin investors and entrepreneurs in recent years, as the province has abundant access to hydropower and offers huge savings in electricity costs for mining businesses that operate in Sichuan.
The closures come at a critical moment for mining businesses, as Bitcoin’s price has tripled over the course of 2017. “The price is so high at the moment,” said a bitcoin mine manager in an interview with Yicai Global, “shutting down costs mine owners hundreds of thousands of yuan every day.”
The reports appear at odds with the Chinese government’s recent to decision to again allow deposits and withdrawals in fiat currencies to be processed by the country’s major exchanges. The moves come ahead of announcements that The People’s Bank of China will roll out regulatory measures for bitcoin trading designed to prevent money laundering in June.
For China, a Regulated Bitcoin Trading Industry Will Generate Wealth That Will Be Under the Control of the Chinese State
“Bitcoin regulation that the central bank conducted mainly focused on financing and leveraging trading among platforms,” Zhang Jun, a senior analyst at Tai Cloud Research Institute, told Yicai Global. Sichuan officials echoed this sentiment, also stating that “mining is carried out by companies of their own accord” – implying that mining businesses have taken it upon themselves to act outside of the legal apparatus provided by the Chinese government.
The move by China to regulate cryptocurrency trading but crack down on mining appears contradictory at first, but closer analysis of the marxist principles that underpinned the origins of the Chinese central government’s economic policies illuminate a logic to adopting these positions. For China, a regulated bitcoin trading industry will generate wealth that will be under the control of the Chinese state. The industry will be under the control of the central government, and investors would predominantely represent individuals who are already living in cities that are integrated into the contemporary Chinese state-capitalist societal mode.
Mining, on the other hand, will likely flourish in areas such as Sichuan, provinces outside of the major Chinese economic center that are yet to be fully developed and integrated into the contemporary Chinese economy, that can also offer investors abundant access to cheap electricity. This could pose great challenges to China’s attempt to further develop and centralize the vast populations that exist outside of China’s developed core, as greater access to blockchain technology could facilitate the emergence of a myriad of localized, informal economies operating outside of the control of the Chinese government.
Continued Contradictory Stances Likely
For a state whose legitimacy and existence depends upon delivering services with the greatest possible efficiency through the use of a centralized state apparatus, the risk of the economic liberation and autonomy made possible of bitcoin penetrating those provinces that are more autonomously governed is a threat that will be taken seriously.
The move toward holding two seemingly contradictory stances is likely to be indicative of future stances held by the Chinese government regarding cryptocurrency. It is very likely that the government will seek to guide those components of the cryptocurrency industry that will adapt well to China’s current economic landscape and regulation. This while forcefully restricting the development of the components of the cryptocurrency economy that may undermine China’s ability to centralize and control the economies of the entire Chinese landmass.
Do you think Chinese regulators will be able to prohibit commercial mining operations, or do you think the Chinese bitcoin mining industry will continue to operate underground? Tell us your thought below!
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