China is a leader in many aspects, including crypto mining – a process that consumes massive electricity to generate new coins through specialized power-hungry machines known as mining rigs.
Based on the study of the University of Cambridge's Centre for Alternative Finance, 65 per cent of the world's bitcoin miners based in China. However, uncertainty looms large over these bitcoin miners as China prepares to clamp down on bitcoin mining and cryptocurrency trading.
The government's crackdown plan is also causing turbulence in the global crypto market. According to reports, some bitcoin miners are selling their rigs as mining becomes increasingly difficult in China.
Why Is China Taking This Step?
Countries across the world are more dedicated than ever to combat climate change. Creating a new cryptocurrency requires a huge amount of electricity, which is at odds with the country's renewed climate goals.
The high-tech computers, used to mine cryptocurrencies such a bitcoin, solve intricate calculations over long hours. As more coins enter circulation, these calculations become increasingly complex, further extending the mining process that leaves behind massive carbon footprints.
Although bitcoin mining has boomed in China, its communist government never really approved cryptocurrency in general. There is no legal exchange of bitcoin in the country as of now.
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It is estimated that if bitcoin mining operations continue at the current pace, the crypto industry will become one of China’s 10 biggest power-consuming sectors. To put this in perspective, bitcoin industry's power consumption will reportedly be more than entire Italy’s power consumption.
According to data platform Digiconomist, a single transaction of bitcoin generates over 700kg of carbon dioxide. A tree needs an entire lifetime to remove that amount of carbon dioxide from the air.
The crackdown by the Chinese government will likely cause an exodus of bitcoin miners and operations might shift to North America and Central Asia. On Friday, June 4, China-based The9 Limited (NASDAQ:NCTY), a cryptocurrency and gaming company acquired Canadian crypto mining company Montcrypto to start its carbon-neutral operations in the country.
Meanwhile, Shenzhen-based online gambling services BIT Mining Ltd announced last week that it is entering an agreement with a company in Kazakhstan to invest in a crypto mining business in the central Asian country.