China’s Inner Mongolia has banned cryptocurrency mining and declared it will shut all such projects by April, spurring fears the world’s No. 2 economy will take more steps to eradicate the power-hungry practice.
The autonomous region, a favourite among the industry because of its cheap power, also banned new digital coin projects, according to a draft plan posted on the Inner Mongolia Development and Reform Commission’s website February 25. The aim is to constrain growth in energy consumption to about 1.9 per cent in 2021.
Bitcoin extended gains on Monday amid reports of the move, increasing as much as 6 per cent in the session to $47,970.
The announcement unnerved an industry that’s already been through a years-long Chinese campaign to clamp down amid concerns over speculative bubbles, fraud and energy waste. The draft policy was released weeks after China’s top economic planner blasted Inner Mongolia for being the only province to fail to control energy consumption in 2019.
The region now aims to cut emissions per unit of gross domestic product by 3 per cent this year and limit incremental growth of energy consumption to about 5 million tons of standard coal, according to the draft plan.
Chinese officials first outlined proposals in 2018 to discourage crypto-mining — the computing process that makes transactions with virtual currencies possible but consumes vast amounts of power.
Inner Mongolia, which is clustered with large coal mines, is famous for inexpensive energy and has attracted investment from a plethora of power-intensive sectors such as aluminum and ferro-alloy smelting over past decades. The region accounted for 8% of global Bitcoin mining computing power, according to the Bitcoin Electricity Consumption Index compiled by Cambridge University.
China overall had over 65 per cent of the network’s total, with its appealing combination of inexpensive electricity, local chipmaking factories and cheap labour.
The local crackdown is reviving old fears. Beijing since 2017 has abolished initial coin offerings and clamped down on virtual currency trading within its borders, forcing many exchanges overseas. The country was once home to about 90 per cent of trades but the lion’s share of mining and major players like Bitmain Technologies Ltd. have since fled abroad.
Taiwan Semiconductor Manufacturing Co. and Nvidia Corp. are among listed chipmakers that supply crypto miners in China and around the world.