China’s Inner Mongolia region plans to ban new cryptocurrency mining projects and halt existing operations in an effort to reduce energy consumption.
Bitcoin is based on a decentralized network, meaning it is not issued by a single entity such as a central bank. Transactions, recorded on a public record called the blockchain, must be “verified” by miners.
These miners use specially built computers to solve complex mathematical puzzles that make a bitcoin transaction possible. The miners receive bitcoin as a reward and that is the incentive.
But because the computers have high power, they consume a lot of energy.
Bitcoin mining consumes an estimated 128.84 terrawatt hours per year of energy – more than entire countries like Ukraine and Argentina, according to the Cambridge Bitcoin Electricity Consumption Index, a project of the University of Cambridge.
China accounts for about 65% of all bitcoin mining worldwide – Inner Mongolia alone accounts for about 8%, thanks to cheap energy. By comparison, the United States accounts for 7.2% of global bitcoin mining.
However, not all cryptocurrencies work like bitcoin.
Inner Mongolia, located in northern China, did not meet the central government’s 2019 energy consumption assessment targets and was scolded by Beijing. In response, the region’s Development and Reform Commission has drawn up plans to reduce energy consumption.
Part of those plans include halting existing cryptocurrency mining projects by April 2021 and not approving any new projects. Other energy-intensive industries such as steel and coal are also to be reviewed.
The Chinese government has supported the development of bitcoin’s underlying blockchain technology, but has also cracked down on the digital coins themselves. In 2017, Beijing banned “initial coin offerings,” a way to issue digital tokens and raise money. The government has also cracked down on companies involved in cryptocurrency operations, such as exchanges.
China is also striving to become more environmentally friendly. President Xi Jinping said last year that the country aims to peak carbon dioxide emissions by 2030 and carbon neutrality by the year 2060.
A major Chinese bitcoin mining hub shuts down its cryptocurrency operations