China Is Allegedly Shutting Down Bitcoin Mining

The rise of Bitcoin, and really most cryptocurrency, has been tied to China. China is the home of cheap processors and cheaper electricity, so the complicated job of doing the math required to run the Bitcoin blockchain and mine the actual Bitcoins has largely fallen to Chinese entrepreneurs. But the Chinese government isn’t a fan of Bitcoin, for a few reasons, and it appears that a shutdown of mining operations is imminent.

The Chinese government spent most of 2017 trying to control Bitcoin, at least within its borders: China, remember, is a state that heavily surveils its citizens and has an planned, controlled economy. Bitcoin, which is a stateless currency by design and relatively anonymous as these things go, is fairly antithetical to both goals. China’s ordered Bitcoin exchanges closed and shut down initial coin offerings and it’s gone on a PR offensive as well. Pan Gongsheng, a deputy governor of the People’s Bank of China, for example, dismissed the idea of Bitcoin in a recent interview.

It hasn’t worked: Chinese Bitcoin trading has barely slowed, and Chinese Bitcoin mining operations appear not to even have noticed the government’s moves. But, according to Vice, word is leaking that China is making its Bitcoin miners put down their picks, or else. It appears China will simply make it too expensive to mine by increasing electricity prices, land taxes, and acting on the currency’s fairly awful environmental record.

That will cripple roughly 70% of the Bitcoin mining and transaction market, and almost certainly drive up prices: It’s basic economics. With far, far fewer people mining Bitcoin, there won’t be nearly as many Bitcoins to meet demand. That’s almost certainly going to drive up the price, although considering Bitcoin is built entirely on the faith people have in Bitcoin, a price collapse isn’t out of the realm of possibility. It’s also going to drive up the cost of Bitcoin transactions, which may be a moderating influence; it’s simply not cheap to use Bitcoins.

That could have serious geopolitical implications as both Russia and North Korea may try to horn in on the market: Russia has already publicly discussed a desire to grab one-third of the Bitcoin mining market from China and North Korea is reportedly racking up a fortune. That will almost certainly invite the investigation of regulators, and may crash the market in of itself; it’s difficult to imagine Bitcoin’s libertarian true-believers sticking by the currency when the very tyrants they’re trying to fight with it start profiting from it, and it may even qualify as a crime to accept Bitcoin from Russian financial entities under current sanctions.

The boom has not been lowered yet, of course, and it may never be lowered; China might decide it prefers the strategic advantage and start trying to control the currency directly, although that would have its own implications. That said, expect a roller coaster, no matter what.

If you’re into Bitcoin, this probably won’t worry you too much… The fact is, it’s just the nature of the beast.