China’s Communist Party announced today in a surprise move that it would be reversing its stance on Bitcoin mining, legalizing mining for Chinese entities and individuals. In 2021, the Chinese government banned Bitcoin mining, citing risks of capital flight, environmental challenges, and competition to their nation’s digital currencies.
The announcement came during growing tensions between the United States government and the world’s largest Bitcoin miner manufacturer, Chinese based Bitmain. Allegedly, Bitmain skirted US sanctions on providing companies such as Huawei with AI chips. Latley, US based Bitcoin miners have been facing seizures by customs of Bitmain miners without much explanation, as reported on by Blockspace.
The move comes at a time when mining profitability is squeezing many US based mining firms. Before the Chinese mining ban, some speculated that China housed up to 75% of the global Bitcoin hashrate. Some speculate that it still has up to 20% of the global hashrate despite the ban. China’s Re-legalization of Bitcoin mining poses the possibility of an explosion in network hashrate, threatening the viability of many American firms.
Today China dominates global Bitcoin miner manufacturing with the three largest manufacturers: Bitmain, Micro BT, and Canaan, based in the communist nation. With rising tensions in trade wars, combined with the legalization of Chinese mining, many are fearful that China will restrict exports of Bitcoin mining machines to the west, meaning that the United States would be at a serious disadvantage. Luxor estimates that the United States currently has roughly 36% of the world’s hashrate with 17% of it estimated to be located in Texas.
China has been facing many economic headwinds due to the fall out of their restrictive Covid- 19 response, the deflation of their real estate bubble and the general global economic downturn and may be looking at Bitcoin as a way to help jump start their faltering economy.
Many are speculating whether this move may mean that China will be changing its tune in regards to Bitcoin in general, seeking to try and outpace the United States in stockpiling the digital currency.
If the Chinese government were to restrict exports of Chinese made Bitcoin miners, it could put the United States years behind the land of the dragon. While TSMC (The world’s largest manufacturer of semiconductors) has been building chip manufacturing plants in the United States, it will likely take some time for the other manufacturers based in the US to catch up with Bitmain, leading to a likely dominance of Bitcoin network hashrate by China.
There are some hopes though for preventing complete network centralization. “TSMC, based in Taiwan, could stop providing ASIC chips to Chinese manufacturers,” said Jason Les, CEO of Riot Platforms. “This would hurt Bitcoin’s decentralization and could escalate tensions with China.” he explained. In recent yrars, China has been floating the idea of invading Taiwan. If China were to invade the island nation, that would only raise tensions with the west who has been on and off on whether they would provide military protections to Taiwan in the case of military conflict.
Chinese premier Xi Xinping has reportedly been meeting with Kim Jong Un in recent months, learning about the North Korean Bitcoin strategy.
This is a guest post by Bitcoin Bugle. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
