China set to eliminate Bitcoin, virtual currency mining

2019-04-10 08:57:00Global Times Editor : Li Yan ECNS App Download

Bitcoin's price has been on a bull run this month, but the virtual currency could soon feel a chill from China, as government agencies and officials signal that they might further tighten their grip on mining and trading of virtual currencies.

On Monday, China's top economic planning agency the National Development and Reform Commission (NDRC) released a catalogue of industries that it would support, restrict or eliminate. The catalogue listed "mining" activities for Bitcoin and other virtual currencies as an area to be "eliminated."

Furthermore, the NDRC did not mention a specific timetable or plan to eliminate virtual currency mining, which indicates the government will immediately eliminate the sector.

That should leave no speculation about China's official stance against Bitcoin and other virtual currency mining, and, given China's role as a world leader in mining activities, the move will likely have a major impact on the global market, analysts said.

Though China's central bank banned Bitcoin trading in September 2017, mining continued in China, despite efforts to phase out. 

Last year, the Office of the Leading Group for the Special Campaign against Internet Financial Risks, which oversees the government's efforts in fending off online financial risks, released a policy directive to phase out mining operations in an orderly manner, citing massive consumption of energy and financial risks.

Some local governments in areas such as North China's Inner Mongolia Autonomous Region and Southwest China's Yunnan Province, where bitcoin mining is concentrated, released similar policies. But mining activities have continued under disguise, according to media reports.

The NDRC's move on Monday, which followed recent calls from Chinese leaders to further tighten regulations on trading, reflects Chinese officials' determination to "wipe out" Bitcoin mining and trading in China, according to Zhao Yao, contract research fellow at the Institute of Finance and Banking at the Chinese Academy of Social Sciences.

"There have already been some policies about phasing out Bitcoin mining, but they have not been very effective as some local governments, in pursuit of GDP growth, continue to ignore the risks of Bitcoin," Zhao told the Global Times on Tuesday. "The move by the NDRC, which determines industrial policies, carries much more weight."

Chinese lawmakers and political advisors have also called for tighter rules reins on virtual currencies during this year's legislative and political advisory sessions, known as the two sessions, in March, which is often described as the most important political event of the year.

Shi Guilu, an NPC deputy from Northwest China's Shaanxi Province, submitted a proposal that called for clear legal definition of virtual currency to close loopholes and prevent illegal trading.

Zhao said to completely ban Bitcoin trading, it is imperative to eliminate mining because miners also trade. "How can you ban trading of a product, if you can't ban its source?" he asked.

Bitcoin prices jumped from around $4,100 on April 1 to around $5,300 on April 3 before falling back to around $5,200 on Monday, with some expecting that the virtual currency could shoot up to $6,000.

While there was no clear indication of what specifically drove up Bitcoin prices, some media reports have suggested that there has been a surge in Chinese purchases of Bitcoins recently, which has likely contributed to a bull run for the virtual currency's prices. 

Chinese investors are willing to pay extra, about 5 percent higher than traditional market price, for Bitcoin as they have been forced to go underground after the trading ban, according to a report by cnLedger, a Twitter account that follows cryptocurrency news in China.

"I also read some rumors that Chinese buyers are jumping on the ship again," a Beijing-based observer told the Global Times on Tuesday, though he added that he had no idea what was behind the bull run. "It could be anything!"

But tougher regulations on mining and trading in China could drag down Bitcoin prices, analysts said.

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