The mining business is just too lucrative. There is no other explanation for the fact that, contrary to the pessimistic reports of the last few weeks, miners have a future in China. We report exclusively.
After the Chinese government made life difficult for Bitcoin miners again in May, easing is looming. Apparently a conglomerate of government, mining and energy industry representatives is planning to create regulatory standards for the Bitcoin industry in China. BTC-ECHO found out about this in an exclusive conversation with Peter Marggaff. Marggraff is Managing Director of Crypto Supply GmbH, a German distributor and hosting service for mining rigs.
“The Chinese government invited representatives from the mining industry to a meeting on June 2nd – that is certain.” It should have been about a regulated use of electricity for Bitcoin mining. Marggraff, himself an expert in the operation of rigs, is in close contact with a participant at this conference who does not want to be named. According to Marggraff, the contact operates “over 10,000 rigs in China” and is therefore one of the leading stakeholders in the cause.
It’s all about the energy mix
From our conversation it emerged that the Mining Ban grew primarily from experience with “dirty” BTC mines in Inner Mongolia. After all, a large part of the electricity produced there comes from coal power, an energy source that is very CO2-intensive and therefore contributes to climate change. A blanket ban on mining in China could have been a snap shot that the government now wants to reverse.
“What I have noticed is that the Chinese government wants to get rid of the dirty image of mining and want to kick the miners out of Inner Mongolia,” said Marggraff.
Renewable crypto mining is still to be allowed, according to participants: inside circles. Because electricity from the water-rich regions of China is so cheap because there are simply too few consumers. “Without mining, the electricity would simply be fed into the ground,” says Marggraff.
This also shows that the energy mix is decisive for assessing the environmental balance of the mining of proof-of-work cryptocurrencies. Because, contrary to what is often shown, the generation of electricity does not mean the emission of greenhouse gases. If BTC is generated through hydropower, for example, the Chinese government doesn’t seem to have a problem with it either.
China does not want to ban Bitcoin
According to Marggraff, it is not surprising that China wants to have a say in mining. After all, all hydropower plants – for example in Shanxi, a water-rich province in the north of the People’s Republic – are owned by the government. The government does not seem to like the fact that miners feast on the state-subsidized cheap electricity. Beijing now wants a piece of the pie.
China wants to become a pioneer in renewable mining. At the same time, the government wants to signal that it regards cryptocurrencies as a virtual asset and does not want to ban Bitcoin,
says Marggraff to BTC-ECHO. However, mining could also become more expensive in China in the future. Marggraff’s source in China at least fears higher taxes on mining income.
Exports are increasing
Not least because of this, a small mining exodus from the Middle Kingdom has recently been observed. More and more companies from the industry are migrating to the global north. So says Ebang International, a manufacturer of rigs from Hangzhou, China Reutersthat there would still be delivery bottlenecks for ASICs – despite the loss of domestic demand. The reason for this is increased interest from abroad. At Canaan, also a manufacturer of ASICs, the tills are ringing due to the demand from overseas. The Nasdaq-listed company generates 78 percent of its sales from exporting mining rigs to non-Chinese countries. This comes from the Annual report for the first quarter of this year.
Overall, the meeting between industrialists and Chinese government representatives sends a positive signal. After all, the general mining ban seems off the table for the time being. If only dirty coal-powered miners are actually banned, that would be a positive signal for Bitcoin’s decentralization as well as for the climate.
Environmentally friendly mining is in vogue. This is also shown by the founding of the Bitcoin Mining Council in the USA. As we reported in more detail here, the largest miners in the country are now committed to ensuring a clean mining future in the land of unlimited possibilities.