China was once one of the countries with the strongest stance against Bitcoin (BTC) mining and ownership. So much so that they banned mining locally and using any crypto within its territory. They are now showing interest in changing this stance which will mean reversing policies implemented years ago to join the blockchain-based economy.
This growing interest in decentralised finance (DeFi) is inspired by the growing pressure the government is getting from its local investors. It is in the best interest of everyone that the country keeps up with the improvement in technology with a strong economic impact like Bitcoin.
When and why was Bitcoin mining banned in the first place?
The Chinese government showed disinterest in crypto as early as 2017 when it banned initial coin offerings (ICO) and exchanges in the country. Their hammer fell on Bitcoin mining much later in 2021 when they declared all crypto businesses are illegal. This includes crypto casino games, trading, and loans using virtual tokens.
Two narratives are inspiring China’s stance against crypto. The first is how digital assets as a mode of payment disrupt economic and financial order because they can be breeding grounds for crimes. This is about money laundering and funding of terrorists which the whole world is trying to combat.
The main reason is mining’s strong carbon footprint because most of the country’s power comes from fossil fuels such as coal. Carbon emissions then per Bitcoin mines can reach up to 8,000 kg to 13,000 kg which is estimated at 24,000 kg to 40,000 kg per hour in Inner Mongolia. The ban on mining was effective in June 2021 to combat this practice.
What happened next after China’s ban on Bitcoin mining?
The most evident effect China’s crypto exodus had on Bitcoin is a sharp 50% drop in the network’s computational power. It stabilised at 80% a bit later until mining activities grew stronger in the United States to compensate for their absence. Bitcoin also saw strong market growth, reaching a new all-time high in October 2021 that wasn’t surpassed until 2024.
These great developments in the Bitcoin market happened without China’s involvement. Thus, their local investors were unable to capitalise on the DeFi economy. Many Chinese miners fled to the United States to continue their activities, resulting in a strong carbon emission increase in the West.
Why is China reconsidering its decision now?
Critics of the ban estimate that China lost $4 billion in annual mining revenues had they chosen to regulate the activity rather than ban it. They should have taken it as a chance to innovate on regulations and technologies to stay ahead of the world economy. Instead, they are trying to keep up with a market that has grown so much without China’s involvement.
China’s attempts lately to reconsider its mining policy is a good step in the right direction for its local investors and the crypto market. Adding more funds to DeFi’s increasing market capitalisation and widening its adoption is always helpful for its development in the long run. The world monitors China’s decision to ease this ban and adapt accordingly.
If the ban is lifted, what does this mean for the Bitcoin community?
China is an economic and technological powerhouse across all industries. Their involvement in any sector boosts that field’s rapid development and adding that to Bitcoin will always result in a net positive. Among the most exciting ventures, they can try to help improve Bitcoin’s power consumption to align with their carbon neutrality goals.
Another sector they can help with is increasing crypto adoption, not just for Bitcoin, but all digital assets, including layer-2 tokens. Dabbling in developing crypto casino games is also one of their interests because of their big investments in offshore gambling. Either way, Chinese investors reentering the crypto circle is highly anticipated.
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