China announced that all crypto-related activity would now be illegal, bringing the country’s campaign on cryptocurrency to a conclusion.
The reasons for China’s extremely punitive crypto restrictions range from its usage as a tool for money laundering and smuggling to environmental pollution and the high energy consumption required for bitcoin mining.
For years, China has had the highest concentration of bitcoin miners in the world. Bitcoin miners in China accounted for three-quarters of worldwide hashrate (a measure of crypto-mining activity) in August 2019.
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China’s share has reduced to 46% by March 2021, the most recent month for which data is available at Cambridge University’s Bitcoin Electricity Consumption Index, as the country tightened its prohibitions on crypto-related activity.
Bitcoin miners ripped out their servers, packed them into shipping containers, and relocated for countries with cheap electricity and more welcoming regulatory environments, such as Kazakhstan and Texas in the United States, this summer, after aggressive Chinese enforcement against mining sent crypto prices tumbling.
If China can completely eliminate bitcoin mining within its boundaries, it will save 86 terawatt hours (TWh) of electricity, according to research firm Rystad Energy in Oslo. It’s around the same amount of electricity as Finland, Chile, the Philippines, and Belgium consume in a year, or nearly the same as the 84 countries with the lowest electricity use combined.
While data on China’s current energy use in bitcoin mining isn’t yet accessible, locals claim that mining activity has declined significantly. Kevin Zhang, vice president of Foundry Services, a digital asset mining firm, estimated the impact of the crackdown in June on mining.
While reclaiming power from crypto mining may help China meet its national emissions reduction targets and reduce pollution within its borders, the environmental benefits are likely to be fleeting, lasting only as long as it takes crypto-miners to pack up their machines and relocate to another country.
Bitcoin mining accounts for just over 1% of China’s total electricity consumption, which is expected to be 7,510 TWh in 2020 by Rystad Energy. Coal power provided 63 percent of the estimated 86 TWh consumed in bitcoin mining, especially in Chinese provinces like Xinjiang and Inner Mongolia.
Meanwhile, according to Bloomberg, more than ten provinces in China have limited the usage of electricity in order to reach targets for reducing energy and emissions intensity.
According to the Cambridge bitcoin electricity index, bitcoin’s worldwide energy consumption dropped from over 125 TWh in May before China’s summer crackdown to over 60 TWh by June 30. Last Sunday, consumption had already soared to 98 TWh.
