China’s Inner Mongolia Region plans to ban new cryptocurrency mining projects and shut down existing operations 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 a blockchain must be “verified” by miners.
These miners use purpose-built computers to solve complex math puzzles that make a Bitcoin transaction possible. The miners receive Bitcoin as a reward and that is the incentive.
However, because the computers are very powerful, they consume a lot of energy.
Bitcoin mining consumes an estimated 128.84 terawatt hours of energy per year – more than entire countries like Ukraine and Argentina, according to the Cambridge Bitcoin Electricity Consumption Index, a project by the University of Cambridge.
China accounts for around 65% of all Bitcoin mining worldwide – Inner Mongolia alone accounts for around 8% thanks to cheap energy. By comparison, the United States accounts for 7.2% of the world’s bitcoin mining.
However, not all cryptocurrencies work like Bitcoin.
Inner Mongolia, located in northern China, did not meet the central government’s energy consumption assessment targets for 2019 and was abused by Beijing. In response, the region’s Development and Reform Commission has drawn up plans to reduce energy consumption.
Part of these plans is to shut down existing cryptocurrency mining projects until April 2021 and not approve any new projects. Other energy-intensive industries such as steel and coal should also 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 “first coin offerings” that could be used to issue digital tokens and collect money. The government has also taken action against companies involved in cryptocurrency operations such as exchanges.
China is also striving to become more environmentally friendly. President Xi Jinping said last year the country aims to achieve the highest carbon emissions by 2030 and carbon neutrality by 2060.