{"id":101229,"date":"2019-04-09T06:19:55","date_gmt":"2019-04-09T13:19:55","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=101229"},"modified":"2019-11-07T02:53:01","modified_gmt":"2019-11-07T02:53:01","slug":"analysis-bitcoin-mining-ban-china-impact-btc-price-security","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/analysis-bitcoin-mining-ban-china-impact-btc-price-security\/","title":{"rendered":"How a Bitcoin mining ban in China could impact BTC’s price and security"},"content":{"rendered":"

China\u2019s central planning agency announced<\/a> plans to ban Bitcoin<\/a> mining and is currently soliciting comments before it makes its final determination. Mining and cryptocurrency experts have mixed opinions on how the move will impact the security and price of BTC.<\/p>\n

China Dominates Cryptocurrency Mining<\/h2>\n

China is the world\u2019s largest manufacturer of Bitcoin ASICs and specialized cryptocurrency mining hardware. The two largest firms in the industry, Bitmain Technologies<\/a> and Canaan Inc.<\/a>, both primarily operate out of the country.<\/p>\n

Not only that, research suggests<\/a> that 74 percent of Bitcoin\u2019s network hashrate originates from Chinese-managed pools<\/em><\/a>.<\/p>\n

To remain secure, it\u2019s necessary that no single party controls more than 50 percent of Bitcoin's network\u2019s hashrate. As such, the same research<\/a> suggests that the Chinese government could influence these mining pools to censor specific users or miners, deanonymize users, weaken consensus, and destabilize the network.<\/p>\n

Although the exact percent of the network\u2019s hashrate coming from Bitcoin mining physically taking place in China is unknown, the abundance of cheap hardware and electricity in the country suggests that it leads in this area as well.<\/p>\n

Central Planning Agency Plans to Ban Crypto Mining<\/h2>\n

On Apr. 8th, China\u2019s National Development and Reform Commission (NDRC)\u2014an agency responsible for the macroeconomic policy which has broad administrative and planning control over the Chinese economy\u2014announced it was planning to ban Bitcoin and cryptocurrency mining, as first reported<\/a> by Reuters.<\/p>\n

The Commission\u2019s \u201cGuidelines for Industrial Adjustment\u201d categorizes industries the country wishes to encourage, restrict, or eliminate. The first set of these guidelines were published in 2011.<\/p>\n

In the Commission\u2019s most recent draft of the guidelines, Bitcoin and cryptocurrency mining was added to the list of activities slated for elimination:<\/p>\n

\u201cVirtual currency \u2018mining\u2019 activities (the production process of virtual currency such as Bitcoin),\u201d stated a translation of the\u00a0document<\/a>.<\/p><\/blockquote>\n

Activities which are planned for elimination are mainly \u201cbackward\u201d processes, technologies, and products. The Commission asserts these industries tend to violate local laws and regulations, have unsafe working conditions, waste resources, or pollute the environment. Thus, it seems the agency is of the opinion that Bitcoin mining fulfills one or more of these criteria.<\/p>\n

Impact on Bitcoin ASIC Manufacturers<\/h2>\n

CryptoSlate reached out to a major Bitcoin ASIC manufacturer. According to a source working at the firm, the ban would only restrict the physical mining of cryptocurrency and not the production of specialized hardware.<\/p>\n

That said, the source also stated the ban would be disastrous for the company\u2019s business because it would drastically reduce the number of customers who could buy their products. In such a scenario, ASIC manufacturers may need to pivot into niches like AI and machine learning hardware, suggested the source.<\/p>\n

The employee also stated that the shrinking mining sector would affect the short-term confidence in BTC, implying that its price would be negatively impacted.<\/p>\n

Given the stakes of the Commission\u2019s decision, the company CryptoSlate reached out to plans on \u201csending suggestions\u201d to the agency to avert the ban.<\/p>\n

BTC Price Impact<\/h2>\n

In contrast, Mati Greenspan<\/a>, senior market analyst at eToro, suggested the ban is more likely to increase the price of bitcoin:<\/p>\n

\n

If this ban does end up happening its more likely to push BTC prices up than down.<\/p>\n

The loss of cheap Chinese electricity would raise the mining cost, which is net positive on price.<\/p>\n

It would also serve to kill the FUD that Bitcoin mining is centralized.https:\/\/t.co\/OhVh8fUaXv<\/a><\/p>\n

— Mati Greenspan (@MatiGreenspan) April 9, 2019<\/a><\/p><\/blockquote>\n