China turns up heat on cryptocurrencies with ‘elimination’ drive

NDRC and other Chinese government agencies follow central bank in issuing curbs aiming to eventually shut down trade and mining of virtual currencies
Higher power tariffs for cryptocurrency miners tie in with 2060 carbon neutrality target set by Xi Jinping

China economy

Frank Tangin Beijing

Published: 8:41pm, 25 Sep 2021

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China’s regulatory and banking authorities are banding together to wipe out cryptocurrencies such as bitcoin in the country, with new measures launched to ban new investments, create a road map to end virtual currency mining, and cut off any related financial transactions.

The move redoubles efforts from the world’s second largest economy to remove deeply buried risk within its financial system and proceed with an ambitious energy-saving and emission-cuts campaign.

The National Development and Reform Commission on Friday announced it was putting cryptocurrency mining into the elimination category – which means an immediate ban on new investments, business restrictions, and a road map for their eventual shutdown.

“We must distinguish [virtual currency] mining from blockchain, big data and cloud computing industries, and guide companies to develop those with low resource consumption but high added value,” it said in a joint circular with 10 other government agencies.

This came the same day the People’s Bank of China renewed its crackdown on cryptocurrency trading and financing, warning that any foreign exchange that provided services to Chinese citizens through the internet was engaging in illegal financial activities.

“We’ll keep the high-pressure stance and employ dynamic monitoring to curb virtual currency trading … and safeguard financial order and social stability,” it added in a countrywide notification.

The price of bitcoin, the world’s most traded cryptocurrency, dropped about 6 per cent on Friday following the PBOC announcement.

The Chinese authorities have already suspended any preferential fiscal and tax policies, bank credit and other financing channels for virtual currency. They have also requested a weekly update on the computing capability and power consumption of existing miners, and aim to dig out hidden ones with regulatory coordination and information sharing.

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Under the new arrangements, cryptocurrency miners will face a higher power tariff, with a central government requirement of 0.3 yuan (US$0.04) extra per kilowatt plus additional local hikes, and be barred from direct power trading.

To force local implementation, power consumption related to cryptocurrency mining will be double-counted when officials receive their annual performance appraisal, Friday’s joint circular showed.

The moves from NDRC, China’s macroeconomic planning body responsible for its energy-saving plans, come as Beijing steps up action to achieve the 2060 carbon neutrality target put forward by President Xi Jinping last year.

“The crackdown is significant to improve China’s industrial structure, push forward energy-saving and emission cuts and accomplish carbon neutrality goals,” according to an online statement from NDRC.

China has been a major contributor to the world’s bitcoin computing power, where producing one bitcoin consumes hundreds of kilowatts, with such energy-intensive mining activities mainly concentrated in Inner Mongolia, a region with abundant thermal, solar and wind power, as well as the hydropower-rich provinces of Sichuan and Yunnan.

Nine provinces or regions, including Guangdong, Yunnan, Jiangsu and Xinjiang, reported a rise in energy intensity in the first half of this year, government data showed. Ten others, including Sichuan, failed to reach the previously set energy intensity target.

In addition to cracking down on cryptocurrency miners, some provincial authorities are now scrambling to slash the output of energy-intensive industries to ensure they reach 2021 control targets.

For instance, Yunnan earlier this month ordered silicon metal output to be slashed by 90 per cent in the last quarter, while capping monthly aluminium production at the August level. Yunnan is the country’s largest silicon metal producer after Xinjiang.

This article appeared in the South China Morning Post print edition as: Digital currencies face ‘elimination’ drive Mainland on bitcoin elimination drive

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