Shifts in Global Crypto Market: China’s Ban on Crypto Mining

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In late 2021, China banned all cryptocurrency transactions and mining, including bitcoin and blockchain stocks. This came after several phases of targeting digital currencies in China since 2013, restricting financial institutions, companies, and banks from conducting services through cryptocurrencies. The ban came from several of the most important financial regulators in China, such as the central bank and securities and foreign exchange regulators, to maintain control over every aspect and loophole of the economic system and prevent the volatility of digital currencies from undermining China’s financial system. This decision is in line with China’s environmental strategy to make carbon emissions peak by 2030 and reach carbon neutrality by 2060.

However, amidst China’s tactics and strategy to hold complete control over its political and economic processes through such regulations – these policies are not without effect for broader financial processes and digital currencies outside of China and East Asia. The effects of this decision are multi-dimensional and without any dilemma going far outside of China’s jurisdiction.

Restrictive measures on digital currencies in China generated different political, economic, and environmental processes across countries.

As crypto-mining requires plants with high electricity usage, it is considered an environmentally unfriendly industry given that in many countries, electricity is fossil fuel/ coal-produced. China’s ban has caused even more damaging fluctuations in this matter. Studies show that after the restriction was introduced, many crypto miners have moved to countries where crypto mining is allowed, but which are using less renewable energy, such as Kazakhstan. Based on the available data and research, the usage of renewable energy sources like solar, wind, or hydropower dropped from around 40% in 2020 to 25% in 2021. One significant reason is that bitcoin miners lost their access to China’s regions with hydropower.

Before the crackdown, China was a market with the highest share in crypto mining, going almost three-quarters of the global worth. However, this decision generated shifts in the worldwide crypto mining market, with the U.S., Kazakhstan, and Russia becoming the world’s largest centers for cryptocurrency mining. According to recent research, the U.S. share in the global hash rate, which measures the total computational power dedicated to mining, grew from 4.1% in 2019 to 35.4% in 2021. In Kazakhstan alone, it grew from 1.4% to 18.1%, and in Russia from 5.9% to 11.2% over the same period.

The global crypto market has become a reality that cannot be neglected. The total worth of the worldwide cryptocurrency market is above USD 2 trillion and is projected to reach around 5 trillion by 2030. Also, the global crypto mining equipment market is valued at approximately USD 1.130 million. If this trend continues, the crypto market has the potential to become one of the major industries in the future. This shows that the decisions of significant global economic players such as China will necessarily affect future processes. Some countries will most likely try to follow China’s regulatory policies. It is far less likely that the total ban across countries will occur, although a certain level of regulation is necessary and will happen due to the negative potential of money laundering and criminal financing activities. Given the variations at each country’s level, there is also a challenge regarding regulations across countries. Moreover, the aim of the world to go towards a more environmentally safe and responsible world with the reliance on renewable energy will force the crypto mining industry to adjust to eco-friendly policies across countries.