China region has banned crypto mining; shutting all such projects

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China’s Inner Mongolia has banned crypto mining and declared its intention of shutting all such projects by April, spurring fears the world’s No. 2 economy will take more steps in 2021 to eradicate the power-hungry practice.

The autonomous region, that is a favorite among the industry because of its cheap power, also banned new digital coin projects, according to a draft plan posted on the Inner Mongolia Development and Reform Commission’s website Feb. 25. The plan is to constrain growth in energy consumption to about 1.9% in 2021.

The announcement unnerved an industry that’s already been through a Chinese campaign to shrink it down amid concerns over speculative bubbles, fraud and energy waste. The draft policy was announced weeks after the National Development and Reform Commission — China’s top economic planner — blasted Inner Mongolia for being the only province to fail to control energy consumption in 2019.

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The region now plans to cut emissions per unit of gross domestic product by 3% this year and control incremental growth of energy consumption at about 5 million tons of standard coal, according to the announcement.

Bitcoin extended gains on Monday amid reports of the move, rising as much as 5.1% in the session to $47,559.

China first outlined proposals in 2018 to ban crypto mining — the computing process that makes transactions with virtual currencies possible but consumes massive amounts of power.

Inner Mongolia, which is clustered with large coal mines, is known for inexpensive energy and has attracted investment from a plethora of power-intensive sectors like aluminum and ferro-alloy smelting over past decades. The region accounted for 8% of global Bitcoin mining computing power, according to the Bitcoin Electricity Consumption Index compiled by Cambridge University. China overall had over 65% of the network’s total, with its appealing combination of inexpensive electricity, local chipmaking factories and cheap labor.

The local crackdown is reviving old fears. Beijing since 2017 has abolished initial coin offerings and clamped down on virtual currency trading, forcing lots of exchanges overseas. The country was once home to about 90% of trades but the lion’s share of mining, but major players such as Bitmain Technologies Ltd. have since fled abroad.

Taiwan Semiconductor Manufacturing Co. and Nvidia Corp. are among listed chipmakers that supply cryptocurrency miners in China and all around the world.

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