China’s northern region of Inner Mongolia is calling for more comprehensive reporting of cryptocurrency mining, signalling a strong determination to weed out power-consuming activities in the region.
The move comes as the country’s financial regulators have expressed growing concerns over the risks stemming from volatile cryptocurrencies, including bitcoin, ethereum and dogecoin. And Beijing’s growing distrust over these popular digital assets could pave the way for a broader clampdown on digital mining.
“This is to fully play the role of public supervision,” says a notice released this week by the region’s economic planning agency, which included telephone numbers and email addresses for people to report instances of digital currency being mined.
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Inner Mongolia had suspended such mining projects before this month.
The agency listed four crackdown targets: mining enterprises; miners disguising themselves as data centres and accordingly receiving preferential treatment in tax, land and power tariffs; landlords housing mining activities; and those utilising power supplies illegally.
Cryptocurrency mining requires massive amounts of electricity to run the large computer server arrays needed to do the complex calculations required for cryptocurrency transactions, as well as for air conditioning to cool the data centres, so operations have long been attracted to areas such as Inner Mongolia, Sichuan and Xinjiang due to low electricity prices.
Inner Mongolia, which is also the country’s second-largest coal producer, is under mounting pressure to meet its energy-saving targets. Meanwhile, a number of thermal power plants in the region have been constrained by the nation’s carbon-neutrality goals. China wants to reduce carbon dioxide emissions by at least 65 per cent by 2030, relative to 2005 levels, and then achieve carbon neutrality by 2060.
The National Development and Reform Commission has said that China’s energy consumption and carbon dioxide emissions per unit of gross domestic product must be lowered by 13.5 per cent and 18 per cent, respectively, by 2025. No provincial breakdowns have been revealed yet, but Inner Mongolia aims to reduce its energy intensity by 3 per cent in 2021 while capping its energy consumption growth at 1.9 per cent.
China’s leadership has attached great importance to such endeavours. Speaking at a seminar on Tuesday, Vice-Premier Han Zheng said strict controls must be imposed to curb energy consumption and high-emission projects.
These types of strict energy-saving initiatives are among the strong headwinds that cryptocurrency faces in China. Initial coin offerings and cryptocurrency trading are also banned.
Li Bo, deputy governor of the People’s Bank of China, said at the Boao Forum in Hainan province last month that bitcoin was just an alternative investment, rather than currency, and that authorities were studying how to regulate it.
Meanwhile, the central bank has accelerated the pilot programme for its sovereign digital currency nationwide, as China moves further towards being a cashless society.
On Tuesday, three semi-official financial associations – the National Internet Finance Association of China; the China Banking Association; and the Payment and Clearing Association of China – told their members to steer clear of any cryptocurrency-related financing activities while also warning the public that cryptocurrencies are “not supported by intrinsic value”, and that their prices are “easily manipulated”.
Some banks, including China Citic Bank, had already barred users from trading bitcoin via their bank accounts from last month.
Bitcoin fell to a three-month low on Wednesday, dropping below US$40,000, while ethereum continued its gradual decline in recent days, falling below US$3,000.
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