China banned Bitcoin mining, became world’s No.2 Bitcoin miner

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Chi­na has re-emerged as one of the world’s largest Bit­coin pro­duc­ers despite the government’s 2021 blan­ket ban on cryp­tocur­ren­cy min­ing, accord­ing to a new study from the Cam­bridge Cen­tre for Alter­na­tive Finance (CCAF). 

In Jan­u­ary, Chi­na con­trolled 21.1% of the glob­al Bit­coin hashrate, to become the sec­ond-largest Bit­coin pro­duc­er trail­ing the 37.8% in the U.S., accord­ing to the CCAF.

China’s world-lead­ing hashrate share dropped to zero in July and August last year fol­low­ing a series of inten­sive crack­downs on cryp­to min­ing, which sub­se­quent­ly led to a blan­ket ban on the sec­tor in September. 

How­ev­er, China’s Bit­coin hashrate surged back to 30.47 exa­hash­es per sec­ond in Sep­tem­ber, right after the ban, sug­gest­ing “sig­nif­i­cant under­ground min­ing activ­i­ty has formed in the coun­try,” the CCAF said.

A source from a Chi­nese min­ing rig repair com­pa­ny told Forkast that the major­i­ty of the firm’s clients are still in Chi­na. The source request­ed anonymi­ty due to the polit­i­cal sen­si­tiv­i­ty of the subject.

“Access to off-grid elec­tric­i­ty and geo­graph­i­cal­ly scat­tered small-scale oper­a­tions are among the major means used by under­ground min­ers to hide their oper­a­tions from author­i­ties and cir­cum­vent the ban,” the CCAF said in the report, adding that under­ground min­ers could be using for­eign proxy ser­vices to deflect scrutiny.

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Chi­nese author­i­ties have tak­en var­i­ous approach­es to iden­ti­fy and bust hid­den min­ing oper­a­tions. They have relied on unusu­al elec­tric­i­ty con­sump­tion and IP address­es asso­ci­at­ed with min­ing pools to locate min­ing farms. 

Some provinces have also increased elec­tric­i­ty rates for min­ers as a penal­ty in an attempt to deter the resur­gence of min­ing activities.

In March, the country’s anti-graft watch­dog warned that author­i­ties are keep­ing a close eye on pos­si­ble cor­rup­tion behind under­ground cryp­to min­ing. It not­ed that some pub­lic ser­vants use state resources to mine crypto.

The CCAF data showed that Kaza­khstan, which became a pop­u­lar des­ti­na­tion for flee­ing Chi­nese min­ers fol­low­ing Beijing’s ban, placed third with 13.2% of Bit­coin hashrate share in Jan­u­ary, fol­lowed by Cana­da at 6.5%.

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