Crypto miners halt China business after Beijing steps up crackdown

A 2018 file photograph showing a technician inspecting bitcoin mining equipment at a facility in Quebec, Canada. A Chinese State Council committee announced a crackdown on bitcoin mining and trading late last Friday, sending the digital currency tumb
A 2018 file photograph showing a technician inspecting bitcoin mining equipment at a facility in Quebec, Canada. A Chinese State Council committee announced a crackdown on bitcoin mining and trading late last Friday, sending the digital currency tumbling.PHOTO: AGENCE FRANCE-PRESSE

SHANGHAI • Cryptocurrency mining operators, including Huobi Mall and BTC.Top, are suspending their China operations after Beijing stepped up its efforts to crack down on bitcoin mining and trading, sending the digital currency tumbling.

A State Council committee led by Vice-Premier Liu He announced the crackdown late last Friday - the first time the council has targeted virtual currency mining, a big business in China that accounts for as much as 70 per cent of the world's crypto supply.

Miners use increasingly powerful, specially designed computer equipment, or rigs, to verify virtual coin transactions in a process that produces newly minted cryptocurrencies such as bitcoin.

Bitcoin took a hammering after the latest Chinese move, and is now down nearly 50 per cent from its all-time high. It shed as much as 17 per cent on Sunday, before paring some losses and was last trading steady in Asia.

Investor protection and prevention of money laundering are particular concerns of governments and financial regulators, which are grappling with whether and how they should regulate the cryptocurrency industry.

United States Federal Reserve chairman Jerome Powell turned up the heat on cryptocurrencies last week.

Last Thursday, he said they pose risks to financial stability, indicating that greater regulation of the increasingly popular electronic currency may be warranted.

Huobi Mall, part of cryptocurrency exchange Huobi, said in a statement late on Sunday that all of its custody businesses have been suspended. "Meanwhile, we're contacting overseas service providers to pave the way for exports of mining rigs in future," Huobi Mall said via its official Telegram community, asking clients "not to worry and calm down".

BTC.Top, a crypto mining pool, also announced the suspension of its China business, citing regulatory risks.

Founder Jiang Zhuo'er said in a micro blog post via Weibo that in future, BTC.Top would conduct its crypto mining business mainly in North America.

"In the long term, nearly all of Chinese crypto mining rigs will be sold overseas, as Chinese regulators crack down on mining at home," he wrote.

China has already lost its position as a global cryptocurrency trading centre after Beijing banned crypto exchanges in 2017.

"Eventually, China will lose crypto computing power to foreign markets as well," said Mr Jiang, predicting the rise of US and European mining pools.

HashCow, another crypto miner, which owns 10 mining sites in Chinese regions including Xinjiang and Sichuan, and sells computing power to investors, said it will fully comply with government regulations.

In a statement to clients, HashCow said it will suspend buying new bitcoin rigs, and promised full refunds to those investors who had placed orders for computing powers but had not yet started mining.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 25, 2021, with the headline 'Crypto miners halt China business after Beijing steps up crackdown'. Subscribe