A new move reported by Reuters today on the part of the Chinese National Development and Reform Commission may have far-reaching implications into the crypto market.
Apparently this national board, which is responsible for many types of state planning, has indicated it wants to put limitations on cryptocurrency mining as part of an agenda to “encourage, restrict or eliminate” various industries that were published on a list of targeted activities in 2011.
“The draft for a revised list added cryptocurrency mining, including that of Bitcoin, to more than 450 activities the NDRC said should be phased out as they did not adhere to relevant laws and regulations, were unsafe, wasted resources or polluted the environment,” wrote Brenda Goh and Alun John. “It did not stipulate a target date or plan for how to eliminate bitcoin mining, meaning that such activities should be phased out immediately, the document said. The public has until May 7 to comment on the draft.”
The one confusing thing about any reports that Chinese would move to ban cryptocurrency mining is that currently, the lion’s share of Bitcoin mining happens in China.
How could a country that’s so invested go from “60 to 0” so quickly, and be able to rapidly enforce crypto mining bans?
Some in the private sector believe that China doesn’t seek to really eliminate crypto mining, but only to create rules that bring these types of activities into a zone where they are manageable by central government authorities.
One such entrepreneur was quoted in the Reuters report:
“The NDRC’s move is in line overall with China’s desire to control different layers of the rapidly growing crypto industry, and does not yet signal a major shift in policy,” said Jehan Chu, at Kenetic, a blockchain investment firm. “I believe China simply wants to ‘reboot’ the crypto industry into one that they have oversight on, the same approach they took with the Internet.”
As for how a Chinese ban would affect the current crypto market, results are not likely to be good for short-term Bitcoin values.
“While the report is currently in a development stage, if enacted it could stop the recent bitcoin rally in its tracks,” writes Ben Brown today at CCN.com. “Bitcoin surged 27% in the last week to hit a 2019 high, holding above the $5,000 barrier. The proposed crypto mining ban in China, however, could have a negative effect on bitcoin’s value and market capitalization.”
However, Brown suggests that Bitcoin prices would eventually recover.
“After a short-term price shock, it’s likely that prices would stabilize and recover,” he writes. “Bitcoin mining activity would inevitably shift out of China to other locations. Other pools, such as Slush Pool in the Czech Republic and Bitfury in Georgia would pick up the slack. Even major Chinese crypto miners appear to have seen this coming, moving some of their operations out of China. Bitmain, for example, now has operations in the US.”
All in all, the current report on Chinese cooling on BTC is not really anything new in the most general sense – but it is a troubling indicator for enthusiasts who want bigger crypto growth in China and see the Middle Kingdom as a place where fintech is blossoming.