aljazeera.com
Economy|Business and Economy
China crackdown forces crypto mining operators to end operations
After Friday’s crackdown, several firms said they are looking to move their business overseas, especially North America.
China lost its position as a global crypto trading centre after it banned crypto exchanges in 2017 [File: Andrey Rudakov/Bloomberg]
24 May 2021
Cryptocurrency mining operators, including Huobi Mall and BTC.TOP, are suspending their China operations after Beijing stepped up its efforts to crack down on Bitcoin mining and trading, sending the digital currency tumbling.
A State Council committee led by Vice Premier Liu He announced the efforts late on Friday – the first time the council has targeted virtual currency mining, a big business in China that accounts for as much as 70 percent of the world’s crypto supply.
Crypto miners use increasingly powerful, specially-designed computer equipment, or rigs, to verify virtual coin transactions in a process that produces newly minted cryptocurrencies such as Bitcoin.
Bitcoin took a hammering after the latest Chinese move and is now down nearly 50 percent from its all-time high. It shed as much as 17 percent on Sunday, before paring some losses and was last trading steady in Asia.
Investor protection and prevention of money laundering are particular concerns of governments and financial regulators who are grappling with whether and how they should regulate the cryptocurrency industry.
US Federal Reserve Chairman Jerome Powell turned up the heat on cryptocurrencies last week, saying on Thursday that they pose risks to financial stability and indicating that greater regulation may be warranted.
A shift to overseas
Huobi Mall, part of cryptocurrency exchange Huobi, said in a statement late on Sunday that all its custody businesses have been suspended.
“Meanwhile, we’re contacting overseas service providers, to pave way for exports of mining rigs in the future,” Huobi Mall said via its official Telegram community, and asked clients “not to worry and calm down”.
BTC.TOP, a crypto mining pool, also announced the suspension of its China business, citing regulatory risks.
Founder Jiang Zhuoer said in a microblog post via Weibo that in the future, BTC.TOP will mainly conduct crypto mining business in North America.
“In the long term, nearly all of Chinese crypto mining rigs will be sold overseas, as Chinese regulators crack down on mining at home,” he wrote.
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,” Jiang said, predicting the rise of US and European mining pools.
HashCow, another crypto miner that owns 10 mining sites in Chinese provinces including Xinjiang and Sichuan and sells computing power to investors, said it will fully comply with government regulations.
In a statement to clients, HashCow said it will suspend buying new Bitcoin rigs, and promised a full refund to those investors who had placed orders for computing powers but had not yet started mining.
Risk-adjusted returns
Aside from the sheer scale of the slump in virtual currencies last week – the Bloomberg Galaxy Crypto Index fell almost 40 percent, the most since the pandemic turmoil in March last year – significant intraday price swings have also captivated investor attention.
Still, RBC derivatives strategist Amy Wu Silverman argued in a note Sunday that, based on a measure of risk-adjusted returns known as the Sharpe ratio, Bitcoin has done better than shares in Tesla Inc., the SPDR S&P 500 ETF Trust or Invesco QQQ Trust Series 1.
Bitcoin, Ether and meme virtual currencies like Dogecoin are still sitting on major gains over longer time-frames, such as the past year – about 12,000 percent in the case of Dogecoin.
For Ben Emons, managing director of global macro strategy at Medley Global Advisors in New York, Bitcoin is “firming its grip on markets through volatility, liquidity and correlation”.
SOURCE: NEWS AGENCIES
RELATED
Crypto crash: Bitcoin, Ether, Dogecoin prices all nosedive
Bitcoin fell almost 22 percent on Wednesday, while Ethereum sank 40 percent and Dogecoin lost 45 percent.
19 May 2021
Bitcoin ends week in freefall as China warns of crypto crackdown
The largest digital currency fell as much as 10 percent in late Friday, trading to as low as $35,636.
21 May 2021
Crypto carnage abates as Bitcoin bounces back to $42,000
After a brutal selloff, crypto markets are showing signs of recovery with Bitcoin and Ether clawing back some losses.
20 May 2021
US Treasury wants crypto transfers above $10,000 reported to IRS
In 2020, the Internal Revenue Service added a line about cryptocurrency on its individual tax return form.
20 May 2021
MORE FROM ECONOMY
US: Taliban will have no access to Afghan central bank reserves
Brazil’s assets sink on fears aid programme will hurt fiscal rule
US home construction falls 1.6% amid supply chain bottleneck
IMF more optimistic on Middle East and North Africa growth
MOST READ
‘Detected and blocked’ Indian submarine incursion: Pakistan army
Oxford professors abused position with sexist and drunken conduct
As Arab states normalise with Assad, US faces ‘dilemma’ in Syria
Violent Israeli raids in occupied East Jerusalem wound dozens
Follow Al Jazeera English:
© 2021 Al Jazeera Media Network