China is implementing stricter regulations on the cryptocurrency industry. This time its eyes are set on Bitcoin mining.
Recent news that China was to ban cryptocurrency trading brought FUD – fear, uncertainty and doubt – to the whole crypto market. Combined with the fear of tightening restrictions from the U.S. government and Elon Musk’s tweets that showed a preference for dogecoin over bitcoin, this bad news resulted in the flash crash of bitcoin and altcoins. Bitcoin fell from $60K to as low as $29,000 and is yet to recover since.
The mining power in China accounts for 70% of the global computing power. Most miners have located mines in areas with rich and cheap electricity such as Inner Mongolia and Sichuan. According to a report of the South China Morning Post, new draft rules state that harsher punishments will be applied to unregulated miners in Inner Mongolia. Offenders could be blacklisted from basic social and financial services.
Considering the risks, some large mining farms have begun to relocate. Their destinations include Texas, the United States, Alberta, Canada and other regions.
In the short term, the closing down of mining farms will result in a drop in the computing power of the entire network. Traders in China may enter FUD and liquidate their bitcoin, causing a panic sell-off. However, from a long-term perspective, this will help bitcoin become more decentralized and motivate miners to turn to greener energy.
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