Is China considering lifting its ban on Bitcoin mining due to pressure from Trump's tariffs?
Somebody's Hodling Serious Power: The Great US-China Bitcoin Mining Battle
The wolves are circling, and the stakes are skyrocketing as the US now calls the shots in the crypto mining game. But China, ever the cunning fox, ain't gonna give up without a fight. Here's what's going down—and what the future might hold.
The US Steps Up
Just like that, the US has become the globe's largest Bitcoin mining powerhouse, claiming a whopping 75.4% of the reported hashrate. This shift in dominance marks a dramatic reversal for China, once the undisputed titan of Bitcoin mining.
But how did we get here? Earlier this year, a report from the Cambridge Centre for Alternative Finance (CCAF) confirmed the transformation. It seems like it was just yesterday that China ruled the roost, boasting up to 75% of global Bitcoin mining hashrate as early as 2017. That success was due to China's vast mining infrastructure and low electricity costs.
But that glory day was short-lived: in 2019, China's National Development and Reform Commission (NDRC) threatened to snuff out Bitcoin mining by designating it as an "undesirable industry," triggering a series of mining crackdowns across the country.
China Strikes Back?
So, is China destined to stay in the crypto shadows? Well, it ain't that easy, pal. As BeInCrypto chatted with reps from The Coin Bureau and Wanchain, it became clear that China's capacity for geopolitical agility is anything but ordinary. And the current situation might just be enough to rattle China out of its anti-crypto slumber.
Mining in China: Still Going Strong?
Despite the official ban, Bitcoin mining hasn't completely died down in the Land of the Dragon. Reported by analyst Daniel Batten in July 2024, China's hashrate accounts for about 15% of the global total. "The infrastructure is already in place... and China may find itself incentivized to lean in more strategically, even unofficially," surmised Nic Puckrin, Co-founder of The Coin Bureau.
And, let's not forget about the technological advantage that China boasts. The country's top exporter of cryptocurrency mining hardware could give it an edge should it choose to revive its mining sector. Add to that the unfolding tariff spat between the US and China, and you've got a recipe for uncertainty in US mining operations' long-term cost efficiency.
Can China Take Back the Throne?
It's doubtful China will make a sudden U-turn on its crypto mining ban anytime soon. But with US-based miners accounting for an ever-growing proportion of Bitcoin's hashrate, China certainly isn't immune to curiosity and competition. As Puckrin mused, "With US-based miners continuing to dominate, China is definitely watching and may well be secretly reevaluating its stance."
But China's strategies extend beyond rekindling its Bitcoin mining industry. By approaching the crypto conundrum with a finesse that's uniquely its own, China hopes to chart a new course that minimizes US influence and maximizes its own power.
China's Subtle Approach: Beyond US Dominance
While China squashes widespread crypto use within its own borders, the country still sees value in digital assets as a means to counterbalance the US dollar's iron grip on the global currency market.
Many countries worldwide are already adopting or considering central bank digital currencies (CBDCs) to bolster their domestic currencies. China gleefully takes the lead in these advancements.
"Despite the ban on Bitcoin mining, China has actively participated in the digital asset space through initiatives like CDBC research and the digital yuan (e-CNY)," reported Wanchain CEO Temujin Louie.
And, hey, let's not forget that China's efforts to create a digital yuan are driven by more than a desire to undermine the US dollar: lessening its dependency on the greenback is key. Plus, some believe that if this digital yuan catches on, it could slowly erode the value of Bitcoin and other cryptocurrencies.
A Shadowy Conflict
Aside from digital currencies, China's stance on crypto has shown some signs of duplicity. These wrinkles in the policy could breathe life into speculation that China might just be willing to soften—or even reverse—its blanket ban on mining.
Last month, investment firm VanEck reported that China and Russia—two countries hit hard by US sanctions—are using Bitcoin to settle some of their energy trades. This could indicate a shift in China's outlook on cryptocurrency as a tool for circumventing economic sanctions.
BeInCrypto's chief analyst, Nic Puckrin, reckons that China's "shadow crypto economy" is predicted to expand this year, potentially resulting in a resurgence fuelled by de-dollarization efforts rather than a reaction to US mining dominance. Puckrin foresees a ramp-up in this activity in the near future, especially as more countries employ crypto to sidestep dollar-dominated systems.
As always, China's policy shifts tend to be shrouded in subtlety. To catch its true intentions concerning crypto, keep a keen eye on China's actions, not just its words. Stay on your toes, because this state-of-affairs promises to keep you guessing!
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- The US has taken the lead as the world's largest Bitcoin mining powerhouse, controlling 75.4% of the reported hashrate, a significant shift from China's previous dominance.
- In 2019, China placed Bitcoin mining on its list of "undesirable industries," leading to a series of mining crackdowns, but despite the official ban, China's hashrate still accounts for about 15% of the global total.
- China's potential strategies for boosting its crypto power include rethinking its stance on Bitcoin mining, creating its own digital currency—the digital yuan—to counterbalance the US dollar, and employing cryptocurrency to circumvent economic sanctions.
- Experts predict that China's "shadow crypto economy" will expand this year, potentially fueled by de-dollarization efforts rather than a direct response to US mining dominance.
- Chinese authorities might be observing the expansion of US-based miners and considering their stance on Bitcoin mining as a result.
- The battle between the US and China in the Bitcoin mining sector is complex, with both countries maneuvering to secure their positions in the world of crypto, blockchain, and finance.
