China is stepping up its fight against cryptocurrencies such as bitcoin. A ban on mining digital coins has been introduced in Sichuan province. Many producers of digital currencies can be found in that part of the country, because mining requires a lot of energy and there is a large supply of cheap electricity from hydroelectric power plants.
Authorities in Sichuan have ordered energy companies to stop supplying power to digital coin miners. China accounts for about three quarters of the world’s mining of all cryptocurrencies.
Sichuan is a very important area for this, as is the Inner Mongolia region. There too, the mining of the currencies is strongly restricted and citizens are encouraged to report illegal miners to the authorities.
In addition, the Chinese central bank on Monday imposed a ban on transactions and trading in digital currencies for major payment service provider Alipay and six domestic banks.
The rulers in Beijing have recently been taking a harder line against digital currencies in several areas, partly because of the financial risks involved. At the same time, the high energy consumption in mining is at odds with China’s sustainable ambitions and, according to Beijing, the crypto coins are often used for black trade, money laundering, arms smuggling, gambling and drug trafficking.
Value of digital currencies is under pressure
The price of bitcoin has been falling for some time and fell by almost 8 percent on Monday to below USD 33,000. The prices of other digital currencies such as ethereum were also under considerable pressure.
Bitcoin works on the basis of blockchain technology, a kind of collective log in which all participants together keep track of all transactions. That register is supplemented every ten minutes with a new ‘page’ with the latest changes. To safely handle each addition, a complex mathematical formula must be solved. Worldwide, special computer systems with great computing power are puzzling on them all day long, which consumes a lot of energy. That’s called mining.