The shortages of coal and its rising prices have made the generation of electricity in China increasingly difficult. The Chinese government has attacked Bitcoin for years without placing much importance on mining until now.
For years, the Government of China has attacked the trading, mining, and everyday use of Bitcoin. Although they have caused many crises in the ecosystem, the cryptocurrency has managed to win all the battles.
On September 24th, the People’s Bank of China declared all cryptocurrency-related activities illegal. That was the last thrust that the Chinese authorities have made towards Bitcoin.
Since the first veto in 2013, the Chinese government has imposed measures to prevent the use of cryptocurrencies on at least eight occasions. The bans initially covered the trading of cryptocurrencies and their use as money. At the time, the authorities did not attach much importance to data mining.
China has claimed that Bitcoin cannot be a legal tender because no central bank, government, or federal entity endorses it. That led them to prohibit its use as money since they could not control it.
Another reason the Chinese government has given against Bitcoin and its use is the volatility of its price. They believe the ups and downs in the cryptocurrency market are radical, which represents a high-risk investment. However, BTC has performed better than the shares of many companies in the stock market in the long term.
Although There Are More Excuses, the Reason Seems to Be the Same
Although the energy crisis seems like a valid argument against Bitcoin mining, the primary purpose may be expelling decentralized cryptocurrencies. The Central Bank of China continues to work on its central bank digital currency (CBDC), the digital yuan, which uses blockchain technology.
The electricity consumption of Bitcoin mining is not as high as that of other non-banned industry sectors in China. Many mining farms used hydroelectric power, which they generated on many occasions.
The most likely cause for China’s ban on cryptocurrency mining is the resilience of Bitcoin. Although the authorities have done many things to prevent the use of cryptocurrencies among the population, they have not achieved that goal. People still manage to buy, sell and use Bitcoin and other cryptocurrencies.
The migration of miners due to government measures is allowing further decentralization of Bitcoin mining. For years, China exceeded 60% of the total Bitcoin hash rate worldwide.
Data from the University of Cambridge indicates that China currently has an average of 46% of the global Bitcoin hash rate. Although it is a large portion of the mining power, it is encouraging that there is less than 50%.
The last update to that data occurred in April, but the massive migration of miners outside China started in May. For that reason, the percentage of hash rate in the country is lower.
The existence of Bitcoin and its increasing decentralization will continue to be a powerful tool in the hands of its users. Many analysts consider that the first cryptocurrency on the market is a better asset than gold and other precious metals. Besides, it has proved able to recover from its worst all-time lows until exceeding its all-time highs.
By Alexander Salazar