China’s proposed ban on bitcoin mining is about the environment and capital flight

The dominance of bitcoin’s network infrastructure by Chinese companies could be coming to an end. China’s National Development and Reform Commission, a state-planning body, announced new proposals April 8 which may prohibit bitcoin mining, the energy-intensive process used to secure transactions and generate new units of the cryptocurrency.

Although China banned virtual currency trading and crypto-based fundraising (aka “initial coin offerings“) in 2017, it has struggled to rein in mining. An October study found that Chinese-run mining groups—known as “mining pools”—are responsible for 74% of bitcoin’s hash rate, the network’s computational power. Given that Chinese miners control the lion’s share of the bitcoin network, the country is disproportionately affected by bitcoin mining’s impact on the environment. Industry estimates say that on a daily basis, bitcoin sucks up as much energy as 5 million US households.

In its announcement about industrial improvements, the NDRC said its elimination targets included “backward processes, technologies, equipment and products that do not meet the requirements of relevant laws and regulations, do not have safe production conditions, seriously waste resources, [and] pollute the environment.” The agency recommended an immediate ban of crypto mining. The public may comment on the agency’s proposals through May 7.