China’s Inner Mongolia Cracks Down on Bitcoin Mining

China’s Inner Mongolia region will suspend Bitcoin mining before the end of April, according to the government’s new energy saving plan.

China is currently the most active country for Bitcoin mining, controlling 65% of Bitcoin’s hashrate. Inner Mongolia is a particularly active Bitcoin mining hotspot because of its inexpensive energy.

Market conditions have also promoted mining within China more generally. In recent months, Inner Mongolia and other hotspots have seen heightened enthusiasm for crypto mining following Bitcoin’s upward price trajectory. Mining has become harder but more profitable than ever as a result of the price rise.

However, that growth will be mitigated by the impending ban, which is intended to help China meet its energy-saving targets and reach carbon neutrality by 2060. Bitcoin mining is known for its high energy consumption, and Inner Mongolia and other areas use coal power, which is damaging to the environment.

Apart from mining, Bitcoin and cryptocurrencies are currently a gray area in China. The country banned ICOs in 2017, restricted exchange access in 2019, and clamped down on OTC platforms in 2020.

Though cryptocurrency trading is technically illegal in China, Chinese crypto companies have found ways to bypass government regulation, and the country still dominates the crypto market. Large Chinese exchanges that were once based on the mainland have moved elsewhere to avoid regulation.

Additionally, investors in China can use stablecoins like Tether to move large amounts of money out of the country without relying on banks. The result is a robust stablecoin market in China.

Inner Mongolia’s impending mining crackdown is a decision that could frighten investors, reminiscent of China’s crackdown in 2017. Nevertheless, the restrictions may have some positive effects.

First, the energy-intensive nature of Bitcoin mining has been a much-discussed topic and favorite argument of BTC detractors. Restrictions could encourage the mining industry to turn to green energy sources rather than fossil fuels, which could in turn could help Bitcoin’s image.

Second, the centralization of mining power in the hands of a single country could pose a threat to Bitcoin. The new restrictions could dilute China’s stronghold on Bitcoin mining and the industry at large.

Disclosure: The authors hold BTC, ETH, and other cryptocurrencies at the time of writing.