Caixin
Mar 02, 2021 08:48 PM
FINANCE

Bitcoin Mining’s Days Are Numbered in One China Province

Inner Mongolia is poised to ban new cryptocurrency mining projects and shut down the entire industry by the end of April as part of a plan to meet central government targets for reducing energy consumption over the coming five years.

The Inner Mongolia Development and Reform Commission (DRC) released draft measures (link in Chinese) on Thursday to curb the development of high energy-consuming industries in order to meet goals set in China’s 14th Five-Year Plan that runs from 2021 to 2025. Cryptocurrency mining is one of the sectors highlighted in the document which also says that in principle the region will no longer approve new energy-consuming coke, steel and ferroalloy projects.

Cryptocurrency mining gobbles up vast amounts of power both through the electricity consumed by the specialized computer equipment needed to solve the mathematical puzzles that produce the currency and through the energy needed to cool the machines and prevent them from overheating. Global electricity consumption by the Bitcoin mining network, by far the biggest, has soared since November 2020 from an annualized 55.5 terawatt-hours (TWh) on Nov. 1 to 128.8 TWh on March 1, according to estimates from the Centre for Alternative Finance at the University of Cambridge in the U.K. That equates to more than the entire electricity consumption of Argentina in 2019 and enough to power all kettles used for boiling water in the U.K. for 29 years, the data showed.

Cryptocurrency mining companies have been drawn to China, and in particular to regions such as the Inner Mongolia autonomous region in northern China and the Xinjiang Uygur autonomous region in the far west, where electricity resources are abundant and relatively cheap.

CRYPTO 1

Link to methodology

China is the biggest consumer of computational power for Bitcoin mining, accounting for 65.1% of the total global Bitcoin hashrate in April 2020, while the second-biggest consumer, the U.S., took up just 7.2%, estimates compiled by the Centre for Alternative Finance showed. The estimates are based on data from Bitcoin mining pools BTC.com, Poolin, and ViaBTC that collectively represented 37% of Bitcoin’s total hashrate. Hashrate is a measure of the computing power used by the Bitcoin network and shows the number of calculations per second. Xinjiang accounted for 35.8% of the global total hashrate, or just over half of China’s hashrate, while Inner Mongolia accounted for 8.1% of the global total, the estimates showed.

CRYPTO 2

Link to methodology

The cryptocurrency mining industry has been in the central government’s crosshairs for some time. In April 2019, the National Development and Reform Commission proposed classifying it as a sector to be eliminated in its updated Industrial Structural Adjustment Guidance Catalog, although the designation was removed (link in Chinese) in the final version.

As China works to implement its pledge to create a low-carbon economy and reach peak carbon emissions by 2030, policymakers are putting more pressure on local governments to play their part, setting annual targets for annual energy consumption per unit of GDP and for the use of renewable energy. All provincial-level regions, apart from Tibet, are to be given specific yearly targets for renewables’ share of their total power consumption through 2030, according to an internal draft plan the National Energy Administration sent to local energy authorities on Feb. 5.

The Inner Mongolia government released (link in Chinese) its energy saving targets for 2021 in February, aiming to lower its energy consumption per unit of GDP by 3%, and cap the increase in energy consumption at about 5 million tons of standard coal.

Inner Mongolia’s proposed ban will have some impact on mining farms, but it will not be significant, Jiang Zhuoer, founder of mining pool BTC.TOP, told Caixin. Experienced miners would still prefer to set up farms in Xinjiang where electricity generation is more abundant, he said.

Provincial-level governments across China are gearing up to put more emphasis on lowering carbon emissions and creating a green economy. Beijing municipality released a draft of its local five-year plan in December which listed curbing carbon emissions as a top priority. The capital’s deputy environmental chief said at a forum that month that Beijing would reduce its carbon emissions per 10,000 yuan ($1,545) of GDP by more than 22% this year.

Guidance issued in January by the environment ministry reiterated (link in Chinese) that China must “urgently draw up an action plan to reach peak carbon emissions before 2030,” adding that the government will “comprehensively use relevant policy tools and measures to sustain its promotion and implementation.”

Matthew Walsh contributed to this report.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Nerys Avery (nerysavery@caixin.com)

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