China’s crackdown on crypto mining continues, state-owned firms targeted

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China’s top economic planner will launch a comprehensive crackdown on cryptocurrency mining, with focus on cleaning up state-owned companies’ and “industrialized and centralized” mining activities, said Meng Wei, spokesperson of the National Development and Reform Commission (NDRC), at a press conference on Tuesday.

The NDRC said it will study imposing punitive electricity prices on those who are enjoying household electricity prices but found to be taking part in cryptocurrency mining activities.

The crackdown on cryptocurrency mining is of great significance for advancing energy conservation, achieving carbon neutral goals as scheduled and optimizing industrial structure, said Meng.

Crypto’s blind and disorderly development has a serious negative impact on high-quality economic and social growth, its enormous energy consumption thwarts the country’s low emission targets and it does not have a positive impact on scientific progress or industrial development, he said.

The authority will keep close eyes on the whole supply chain of the cryptocurrency sector and build a long-term mechanism to prevent resurgence of crypto mining, he said.

Last week, the NDRC held a video conference in which it instructed its branches across the country to find and clean up local crypto mining activities and to in particular punish any state-run firms found to be involved.

On Saturday, a top provincial official was removed from his post and the Communist Party after an investigation found that he abused his power in supporting cryptocurrency mining.

The Central Commission for Discipline Inspection and the National Supervisory Commission found that Xiao Yi, a former vice-chairman of the Jiangxi Provincial Committee of the Chinese People’s Political Consultative Conference, violated the country’s industrial policies, according to a statement posted to the Party’s official website on Saturday.

Xiao is the most senior Chinese official punished for supporting cryptocurrency mining, sending a strong signal to local cadres about Beijing’s stance on the issue.

“Xiao violated the new development concept, and abused his power to introduce and support enterprises to engage in virtual currency ‘mining’ activities that do not meet the requirements of national industrial policy,” the government statement said, without disclosing details of Xiao’s infraction.

The government has long expressed its distaste for non-legit e-currencies. In May, the country’s cabinet called for a crackdown on cryptocurrency mining, saying that cryptocurrencies have no real value and their price can be easily manipulated. Since then, Bitcoin mines across the country have been shut down and crypto trading channels blocked.

In September this year, the NDRC listed cryptocurrency mining as an abandoned industry in a new version of the country’s industrial structure adjustment guidance.

The move would facilitate the optimization of China’s industrial structure, and promote energy conservation and emissions reduction, and help the country achieve carbon peak and carbon neutrality, the state-run Shanghai Securities News said in a commentary at the time.

According to the revised guidance, cryptocurrency mining is to be characterized as a sector that makes only a small contribution to the national economy but consumes a lot of energy and creates a lot of carbon emissions. As risks resulting from the production and trading of cryptocurrencies become more prominent, the sector’s disorderly development has adversely affected China’s high-quality economic and social development, said the guidance. 

Until the crypto crackdown over the summer, China remained the world’s top location for bitcoin mining, although that share had declined from 65 per cent in April 2020 to about 34 per cent in June, according to data from the Cambridge Bitcoin Electricity Consumption Index. The latest data for July and August shows China at 0 per cent.