Bitcoin News! Chinese regulators asking miners to exit in an orderly manner!
Bitcoin News! Chinese regulators asking miners to exit in an orderly manner! YiCai: Regulators are asking local departments to report the current status of bitcoin mining companies under administration, and “guide the mining firms to exit in an orderly manner” by taking various measures from the aspects of electricity, land, tax, environmental protection.
YiCai: Regulators are asking local departments to report the current status of bitcoin mining companies under administration, and "guide the mining firms to exit in an orderly manner" by taking various measures from the aspects of electricity, land, tax, environmental protection
— cnLedger (@cnLedger) January 6, 2018
Big news that will likely reshape the global balance of power in crypto mining. The miners will just gradually close down in China while they gradually start up elsewhere..
It may slow down the asic arms race, and make it easier and more viable for individuals to mine again..
sn’t it that GMO (7nm) chipsets from Japan and lower power requirements, mining on PCI-e cards, etc. will change the game anyway? Even if Bitmain exit the space, Samsung, Intel & will likely sell the GMO chipsets in their cards in 2018. This may just accelerate that.
Scenario 1: Miners Elect to Flout New Restrictions
While its decentralized nature has positioned Bitcoin as a relatively straightforward mechanism to overcome existing financial barriers, authorities could potentially use the newly issued crypto rulings to clamp down on mining. Due to the illegality of ICOs and other peer-to-peer activities, local authorities might seize equipment and related infrastructure. As a result, some miners may go underground to sustain activities during any such crackdown.
However, the problem that remains with this scenario is the money aspect. If miners have no way to convert mined crypto-currency into usable fiat currency to support their operations, they may have no choice but to close down. While there are strategies to circumvent such a scenario, it could potentially raise the costs past the point of profitability. In addition, if caught, the repercussions of carrying out these activities might be immense considering the level of scrutiny the local exchanges are currently facing. (See also: Why Bitcoin Could Fall By 30 Percent)
Scenario 2: A Change of Scenery for China’s Miners
Neighboring jurisdictions such as Mongolia and Hong Kong have emerged as notable alternatives to China for the nation’s existing Bitcoin miners, namely due to location. Hong Kong is already attempting to establish itself as a major global hub for crypto-assets and blockchain-related technology as Chinese policymakers continue their crackdown on Bitcoin. Nevertheless, relative to China, Hong Kong is notoriously expensive, with electricity costs running 3 to 6 times the rate of the mainland.
Another potential destination for miners may be China’s northern neighbor Mongolia. While operating costs may run a bit higher than China, it is much more budget-friendly than Hong Kong for miners that often time work on razor-thin budgets. Furthermore, it boasts fiber internet connections from China and Russia, ensuring miners have steady access to the network. Its proximity may mean that technical know-how migrates from China complete with hardware to ensure that Bitcoin can be exchanged for fiat currency to finance ongoing mining activity.
However, the scale of investment for some projects may prevent certain miners from effectively re-domiciling. Bryan Bishop, the developer behind LedgerX, has reportedly issued a warning to local miners to abandon their efforts and begin relocating all their equipment and operations. The crackdown may not leave these groups unscathed considering the sheer amount of physical assets that would need to be moved alongside the extensive investment that already has gone into existing mining facilities.
Scenario 3: Other Global Miners Scale Activities as Margins Grow
Some other popular mining jurisdictions may take advantage of any China ban to increase their own market share, with Georgia being one notable country that stands out from the pack. As the host of Bitfury, one of the five biggest global mining pools (China hosts the other four), the former Russian state has seen investment pour into the crypto arena. Benefiting from access to cheap power and labor, Georgia is positioned to continue gaining market share should Chinese miners be forced to abandon operations.
Apart from Georgia’s relative advantages, India and Iceland also stand out for their affordable energy costs and experience in the business. While other countries with a mining presence like the US and Japan have expanded their own efforts within the industry, these geographical locations do suffer from significantly higher input costs relative to other global competitors. Nonetheless, an exodus of mining operations from China could shift the balance, making these jurisdictions more profitable as they fill the gaps left behind by their Chinese peers.