Tesla and SpaceX CEO Elon Musk suggests that China’s crypto ban is due to the recent power shortage in the nation. Power outages are occurring in Beijing, Shanghai and other cities in China. And, part of the reason can be the mining activities of Bitcoin and other cryptocurrencies.
Last Friday, Chinese regulators, including the People’s Bank of China (PBOC), reiterated the ban on crypto trading and mining, emphasizing that all crypto-related businesses are illegal.
Huobi, one of China’s top three crypto exchanges, has stopped accepting mainlanders to open accounts. Also, Huobi will stop providing services to all mainland customers by the end of this year. China’s e-commerce giant Alibaba bans users from buying and selling mining hardware, software, and even teaching materials about crypto mining.
Musk believes the recent crypto crackdown in China has likely to do with the country’s “significant electricity generation issues.” “Part of it may actually be due to electricity shortages in many parts of China,” said Musk. “A lot of South China right now is having random power outages, because the power demand is higher than expected. Crypto mining might be playing a role in that,” he said.
In addition, Musk believes that the decentralized nature of cryptocurrency may pose a challenge to the Chinese government. “I suppose cryptocurrency is fundamentally aimed at reducing the power of a centralized government,” Musk says. “[Chinese authorities] don’t like that.”
China Bans Crypto Mining to Maintain Power Supply
Bitcoin “mining” refers to a procedure during which computers (or mining machines) perform extremely complex calculations. You can think of it as a computing competition between miners.
As miners continue to improve the performance of their mining machines, the power required for mining is getting higher and higher. In the past few years, miners in mainland China accounted for about 70% of the global Bitcoin mining computing power. The ratio drops to about 50% following China’s intensifying crackdown.
Recently, the Chinese government has issued electricity curtailment orders in various cities, requiring people to restrict electricity consumption. This includes the reduction of local factory operations. Yet, big cities such as Beijing, Shanghai, and Shenzhen, have reported power outages.
Meanwhile, crypto miners in mainland China are taking the blame. Experts criticize crypto mining activities for the huge energy consumption. Additionally, they make the case that the industry has little contribution to the economy, as well as the industrial development and technology innovation in the mainland.
Crypto reporter Colin Wu (Wu Blockchain) cites mainland media Economic Daily saying that more critical regulatory measures will come. And, the crypto market hype in China “will come to an end.”
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