Over the past week, there’s been no shortage of stories documenting China’s efforts to crack down on Bitcoin mining.
As noted a week ago, the PBoC recently held a closed-door meeting where the discussion centered on regulating power use in mining operations. You can read the translated article for yourself here, but suffice to say that miners themselves were shrugging it off. “The recent news is all about fried rice,” one told QQ, adding that “the old news is put after the false news, in order to shorten the bitcoin.”
Obviously, something was lost in translation there (“fly lice“) but the bottom line is that Beijing has never been particularly enamored with cryptocurrencies and when cracking down on exchanges wasn’t enough to stamp out the burgeoning market (which has been variously associated with capital flight), the Politburo moved in to curtail supply.
Indeed, some of the blame for Bitcoin’s lackluster start to 2018 has been placed on China’s increasingly hostile attitude towards miners.
Well on Wednesday, the Wall Street Journal is out reporting that China has “ordered” mining operations closed. To wit:
Chinese authorities ordered the closing of operations that create a large share of the world’s supply of bitcoin, tightening a clampdown that has already shuttered exchanges for the trading of cryptocurrencies in China.
A multiagency government task force overseeing risks in Internet finance issued a notice last week ordering local authorities to “guide” the shutdown of operations that produce, or “mine,” cryptocurrencies, according to the notice and people familiar with the information.
While the notice called for an “orderly exit” without setting a deadline, far-flung areas of China where cryptocurrency mining operations have flourished are complying. A local regulatory official in the far western region Xinjiang said Wednesday that his agency received the notice and is doing “what the country wants.”
Yes, local officials are “doing what the country wants” and while you could plausibly argue that heavy-handed regulation is likely to be a Chinese phenomenon (because as we learned in 2015, failing to comply with the Party on matters related to potentially destabilizing market dynamics can and will land your ass in jail over there), this is further evidence to support the contention that governments are not going to allow cryptocurrencies to become the kind of world-changing phenomenon that’s already baked into prices.
As the Journal goes on to note, “China accounted for nearly 80% of computer power devoted to global bitcoin mining over the past 30 days, a rough approximation of its share of new units created in the same period.”
While it’s safe to assume that miners saw this coming a mile away (after all, it’s not exactly a secret that China is antagonistic towards the space), one certainly wonders how feasible it is to move these operations. In other words, if China pulls the plug (figuratively and literally), this will be highly disruptive.
Additionally, it’s difficult to posit a scenario where China softens its stance. Recall the following hilarious Google-translated excerpt from a recent article in The People’s Daily:
Bubble price of bitcoin is already an issue that need not be discussed. Whether it is from the rise or from the currency itself, bitcoin is full of bubbles. Its so-called advantages: scarcity, fidelity, strong liquidity, transparency and decentralization are all speculations. It is simply impossible to support the same rally as roller coasters. The recent plunge has already explained the issue very well.
Yes, “Bitcoin is full of bubbles” and China thinks you may be “full of” shit if you think they’re going to sit idly by as gangs of local peasants get rich mining something that same People’s Daily piece dubbed “tricked up” nonsense.
In any event, the bottom line is this (from the Journal again):
Bitcoin can’t catch a break in China.
