HashCow and BTC.TOP, two cryptocurrency miners, have shut down their operations in China after Beijing tightened its grip on bitcoin mining and trading, hammering digital currencies despite increased global regulatory scrutiny.
The crackdown was revealed late Friday by a State Council committee headed by Vice Premier Liu He, marking the first time the council has targeted virtual currency mining, a major business in China that accounts for up to 70% of the world’s crypto supply.
Huobi Mall, a subsidiary of cryptocurrency exchange Huobi, announced on Monday that it has halted crypto-mining services for mainland Chinese customers and would now concentrate on international businesses.
BTC.TOP, a crypto mining pool, also announced the suspension of its China business citing regulatory risks, while crypto miner HashCow said it would halt buying new bitcoin rigs.
Crypto miners use increasingly powerful, specially-designed computer equipment, or rigs, to verify virtual coin transactions in a process which produces newly minted crypto currencies such as bitcoin.
“Crypto mining consumes a lot of energy, which runs counter to China’s carbon neutrality goals,” said Chen Jiahe, chief investment officer of Beijing-based family office Novem Arcae Technologies.
The crackdown is also part of China’s stepped-up drive to curb speculative crypto trading, he added.
Bitcoin took a beating after the latest Chinese move, and is now down nearly 50% from it’s all-time high. It shed as much as 17% on Sunday, before paring some losses and was last trading steady in Asia. Elsewhere, Ether fell to a two-month low on Sunday, down 60% from a record peak hit just 12 days ago.
Investor protection and money laundering are particular concerns of global financial regulators who are grappling with whether and how they should regulate the cryptocurrency industry.
The latest shakeout in digital currencies also stems from tighter scrutiny in the United States. Last Thursday, U.S. Federal Reserve Chairman Jerome Powell said they pose risks to financial stability, and indicating that greater regulation of the increasingly popular electronic currency may be warranted.
Huobi, which made the announcement via its official Telegram community, declined to comment. BTC.TOP and HashCow could not be immediately reached for comment
The annual energy consumption of China’s cryptocurrency miners is expected to peak in 2024 at about 297 terawatt-hours, greater than all the power consumption by Italy in 2016, according to a study recently published in Nature Communications.
China has already lost its position as a global cryptocurrency trading centre after Beijing banned crypto exchanges in 2017.
“Eventually, China will lose crypto computing power to foreign markets as well,” BTC.TOP founder Jiang wrote in a micro blog post via Weibo, predicting the rise of U.S. and European mining pools.
Chen of Novem Arcae said the crypto craze, if not curbed, could turn into froth similar to the Dutch tulipmania in the 17th century – often regarded as the first financial bubble in recorded history.
“The only different is that after the tulip bubble burst, there were still some beautiful flowers left,” Chen said.
“But when the virtual currency bubble bursts, what would be left are merely some computer codes.”