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Cryptocurrencies

Cryptocurrency miners flee China as clampdown intensifies

G-20 finance chiefs warn against asset-linked 'stablecoins' without official oversight

Much of China's bitcoin mining capacity has shut down in response to tougher restrictions.

TOKYO -- Those in the business of mining cryptocurrencies are rushing to leave China, which had accounted for 60% of global bitcoin mining, as the nation tightens restrictions on such activities.

China, which is already testing a digital yuan, has moved early to rein in other virtual currencies, sparking widespread disruption.

The government in May announced tougher restrictions targeting cryptocurrency mining and transactions. Mining, an energy-intensive process that involves powerful computers performing difficult calculations, is not compatible with Beijing's pledge to achieve carbon neutrality by 2060.

Some miners are responding by relocating to bordering Kazakhstan and Russia. After halting its operations in Sichuan Province, BIT Mining has been shipping thousands of mining machines across the border into Kazakhstan, and Canada-based IBC Group, which mines bitcoin and Ethereum in China, said this month that it would move staff to Kazakhstan and elsewhere.

Texas, with its promise of cheap energy, is emerging as a destination of choice as well.

Chinese curbs on cryptocurrency have presaged broader skepticism of bitcoin and similar assets among global authorities as central banks move toward developing their own digital offerings.

Meeting last week, Group of 20 finance ministers and central bankers voiced concern about the spread of cryptocurrencies and privately issued virtual currencies. "We reiterate that no so-called 'global stablecoins' should commence operation until all relevant legal, regulatory and oversight requirements are adequately addressed through appropriate design and by adhering to applicable standards," the officials said in a statement.

Global stablecoins are widely usable virtual currencies whose value is pegged to a particular asset, making them less volatile than bitcoin. They are more promising options for cross-border payments -- as well as potential competition for official digital currencies.

Bitcoin mining plunged after the new regulations were announced. The hash rate, a measure of combined computing power across the bitcoin network, has fallen by half, and Cambridge University estimates that bitcoin's total electricity consumption has dropped by at least 50% from its peak.

The constraints on new supply have not buoyed prices. Big investors, worried about miners selling off their bitcoin, are unloading their own holdings first. The cryptocurrency's price sank below $30,000 at one point in June, tumbling to less than half its April peak in a matter of weeks.

The bitcoin economy is showing signs of growth in emerging economies, among which those with few means of earning foreign currencies welcome the cryptocurrency-mining industry. Kazakhstan will impose a new tax on crypto miners in 2022, while Ukraine has plans to build a data center for mining next to its Zaporizhzhia nuclear power plant. El Salvador is poised to make bitcoin legal tender in September and will go into the mining business itself.

Meanwhile, industrialized nations are tightening regulations on cryptocurrencies to fight money laundering, since the ability to trade bitcoin relatively anonymously has made it a favored form of payment for criminals. In June, the Financial Action Task Force added Malta and the Philippines to its money-laundering gray list. The rift between countries on the management and regulation of cryptocurrencies could widen further.

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