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China’s latest crackdown on crypto caused by climate concerns

Aljazeera via Bloomberg | May 26, 2021

bitcoin mining linked to coal demand - China’s latest crackdown on crypto caused by climate concernsSpike in power use from server farms servicing Bitcoin led to illicit coal mining, endangering lives & climate goals.

China’s escalating push to rein in cryptocurrency mining was triggered in part by concern that the practice has stoked a surge in illicit coal extraction, endangering lives and undermining Xi Jinping’s ambitious environmental goals.

Authorities decided to act after concluding the spike in electricity consumption from server farms underpinning Bitcoin and other tokens was a key factor behind rising demand for coal in certain parts of China, according to a person who participated in high-level government meetings on the issue and asked not to be identified discussing private information.

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While China’s central government has enforced a strict ban on digital-asset exchanges and discouraged crypto mining for years, authorities in some remote areas of the country have been more welcoming of the industry because it brings in much-needed revenue. About 65% of the world’s Bitcoin mining took place in China as of April 2020, according to an estimate by the University of Cambridge.

Growing concerns about the environmental knock-on effects help explain why China’s Financial Stability and Development Committee said on May 21 it would crack down on crypto mining and trading, in what amounted to one of the government’s most forceful condemnations of the crypto ecosystem to date.

China’s National Energy Administration and National Development and Reform Commission didn’t immediately respond to requests for comment.

Disentangling crypto mining’s impact on coal consumption in China isn’t easy, especially during periods of economic recovery when power demand is rising more broadly. But in areas like Xinjiang and Inner Mongolia that have long been favorite destinations for the industry, Chinese authorities have drawn a direct link between crypto and coal.

See:  Clean Energy Bitcoin Mining Joint Venture Agreement Signed by Link Global Technologies and Neptune Digital Assets

Some observers are skeptical of China’s emissions pledges, but the country’s top leaders have vowed to make the fight against climate change a priority despite the potential short-term economic drag. At a climate summit convened last month by Joe Biden, Xi reiterated China’s plan to reach peak carbon emissions by 2030 and attain net-zero status by 2060, in part by reducing coal consumption.

For a Chinese government wary of the anonymity, volatility and borderless nature of digital assets, crypto miners represent an obvious target. The country’s regulators have long warned that cryptocurrencies can facilitate money laundering, fraud and terrorist financing.

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