Amidst a Chinese government ban on Bitcoin mining and strong crackdowns in 2021, former Secretary of the Fuzhou Municipal Party Committee Xiao Yi was caught providing financial subsidies and support to miners, ultimately receiving 125 million yuan in bribe sentencing. Despite the ban, mining operations in China remain active, according to the Cambridge Bitcoin Electricity Consumption Index.
China’s Crypto Mining Ban Struggles to Make Huge Impact
Amid a deepening crackdown on cryptocurrency mining and digital currencies, China’s efforts to stifle (at least) the less official side of the industry have fallen short of total success.
This was recently highlighted by the forced confession of Xiao Yi, a former secretary of the Fuzhou Municipal Party Committee in China. In a state-run television broadcast, Xiao admitted to “acting recklessly” and causing “grave losses”, after he was charged with receiving more than $18 million in bribes for construction programs and helping to illicitly promote a local crypto mining firm.
The Chinese government first began to impose a series of restrictions on cryptocurrency miners — such as banning domestic electricity subsides and foreign exchange at the beginning of 2018. However, an all-out ban on the activity in the country was enacted in 2021, with the aim of achieving its ‘carbon neutrality’ target.
The country’s ban also aimed to target capital markets, by blocking access to electricity and capital by miners — with a 0.30 yuan ($0.0431) per kilowatt-hour of electricity use tariff imposed on those discovered.
But, data from the Cambridge Centre for Alternative Finance revealed a steady increase in mining activity and by January this year, China accounted for more than one-fifth of the total hash rate — indicating that the ban has been difficult to enforce. Many miners’ had migrated westward — to exploit cheaper and more flexible power supply arrangements in countries such as the US, whilst still others had sought to avoid detection by scattering their mining equipment over multiple sites and connecting them to small local power-plants, such as dams — not connected to the larger grid.
Cryptocurrency infrastructure had echoed China’s actions, with the country’s central bank continuing to develop technology related to its own digital currency. The e-Yuan has recorded over 100 billion yuan ($13.9 billion) in transaction volume, and a state-backed, non-crypto digital collectible marketplace, termed “China Digital Asset Trading Platform” was recently launched.
China Daily reported the launch of the aforementioned state-backed platform to “promote the sharing of the achievements of Chinese cultural digitalization”, where it will be operated on a state-sanctioned blockchain, known as the “China Cultural Protection Chain.”
However, while China’s government continues to develop its anti-crypto infrastructure, the confession of the former Fuzhou CCP party secretary has raised further questions over the effectiveness of its efforts to totally stifle the industry within its borders.