China central bank poised to regulate bitcoin mining

January 04, 2018 10:51
A worker inspects bitcoin mining machines at a facility in Ordos, Inner Mongolia, China. Photo: Bloomberg

The People's Bank of China (PBoC) plans to regulate bitcoin mining power use indirectly by passing on instructions to local governments in the country, according to reports.

At a meeting at the end of 2017, the central bank told members of the Leading Group of Beijing Internet Financial Risks Remediation that while the PBoC can't directly regulate bitcoin miners’ power usage, it can ask local authorities to do so, Reuters reports, citing a source.

At the gathering, the PBoC called for limiting bitcoin mining development, the source was quoted as saying.

China is one of the world’s biggest sources of bitcoin mining, where miners solve complex mathematical puzzles with computers in order to be awarded virtual coins.

Given the intensive computer calculations, mining activity requires usage of large amount of electricity.

According to Tencent News, the PBoC called for rectifying irregularities in electricity use of some bitcoin mining fields, and discussed limiting the miners' power usage.

The central bank can ask local authorities to find out the locations of mining farms in their respective territories, as a preparation before regulating bitcoin miners' power usage.

Local governments would be told to regulate the power usage of bitcoin miners to gradually reduce the scale of their production.

On Wednesday, the Communist Party mouthpiece People's Daily published an article that warned investors about the bitcoin mania.

Bitcoin is "undoubtedly a bubble", the author wrote, adding that the so-called advantages of the virtual currency are mere "excuses for speculation".

As people speculated that the central bank could clamp down on bitcoin mining, some miners dismissed the reports.

A miner told Tencent News that he considers the talk as a hoax. "It's the same old, worn-out tune played by the bitcoin short-sellers,” he said.

"Even if it is true that the regulator is set to shut down mining farms, the order would be limit to small-sized fields," the miner said.

In September, China announced a ban on all initial coin offerings and all cryptocurrency trading exchanges in the country in a bid to contain financial risks. There has been speculation that bitcoin miners could be the next target.

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