The Chinese authorities ordered new crackdown on crypto mining on Friday, banning virtually all crypto trading activities.
The People’s Bank of China (PBOC) published a list of prohibited Activities, including some that were previously in the gray area of regulation, while the National Development and Reform Commission (NDRC) put in place a plan to cease mining altogether.
In May, the country’s State Council ordered crackdown on crypto mining and trading that sent dozens of crypto companies overseas.
The “Notice to Further Prevent and Eliminate the Risk of Hype in Virtual Currency Trading” signed by China’s leading financial and cyberspace regulators bans all crypto-related activities.
The notice’s comprehensive list of prohibited activities includes exchanging one type of cryptocurrency for another. In 2017, China banned trading between fiat and crypto only.
- The notice prohibited banks and other financial institutions from offering crypto-related services. Three of China’s financial industry regulators said the same thing in May in a statement republished by the PBOC on their WeChat account.
- Employees of exchanges based abroad, including those who work in technical support, are investigated to determine whether they are knowingly involved in the crypto industry. Crypto exchanges were banned from China in 2017. While they moved their headquarters abroad, substantial parts of their business activities remained in the country.
- The statement also called for increased censorship of information on virtual currencies. Websites and apps that conduct crypto businesses will be closed. In the past two months, public crypto voices have been silenced, including news source CoinWorld and the deputy director of a Shanghai securities firm.
- Regulators said they want to put in place an early warning and stop the hype in crypto trading and mining activities.
- The notice called on police to take “tough” action against illegal activities made possible by crypto, including money laundering and gambling.
The notice was signed by the PBOC, Cyberspace Administration, Supreme People’s Court, Ministry of Industry and Information Technology (MIIT), Ministry of Public Security (MPS), General Administration of Market Supervision, China Banking and Insurance Regulatory Commission ( CBIRC) and the China Securities Regulatory Commission.
Meanwhile, China’s highest state planning agency, the NDRC, released a separate “Notice to Rectify Virtual Currency Mining.”
The statement said it has set itself the goal of eliminating the “hidden risks” in crypto mining while pursuing China’s goals of carbon neutrality. While crypto mining isn’t completely banned, it instructs local authorities to crack down on illegal mining activities, with plans to phase out the industry. Mining is to be seen as an “outdated” industry. No new projects will be allowed in and existing projects will be given time to complete.
The notice transfers full control of the mining crackdown to the central authorities of the provincial and municipal governments.
It requires local authorities to identify crypto mining operations, discontinue government and tax support to mining projects, expedite phase-out of existing mining operations, and cease all new investments in mining and financial services for miners.
Many crypto miners fled China after the crackdown in May and took their mining rigs with them. But not all. Little miners who lacked the resources and connections to move abroad were left behind, three Chinese miners told CoinDesk. Some miners secretly plugged themselves back in after an initial shutdown.
In today’s statement, the NDRC tasked local authorities with compiling a list of current and developing mining projects and their features. They are particularly interested in mines that are being built in state-sponsored big data and high-tech parks.
In 2020, some local governments, such as the city of Ya’an in Sichuan, issued preferential guidelines for mining.
The notice also calls on the authorities to check power grids for abnormal power consumption related to illegal mining and to step up on-site inspections of large data centers.
The notice prohibits crypto mining activities under the guise of running a data center, a common practice among Chinese miners. The NDRC wants governments to make a clear distinction between mining, blockchain, and big data and cloud operators in their inspections.
Filecoin and chia mining in particular were largely untouched in May as they don’t use a lot of electricity and don’t require special equipment. When asked about their activities in July, representatives of two companies who had previously identified themselves as Filecoin miners told CoinDesk that they were “data center” operators.
The notice also calls on electric utilities to cease powering mines via direct lines and other methods that bypass the national power grid, bans mining companies from participating in the electricity market, and calls for a “normal” increase of RMB 0.3 ($ 0.05) per kilowatt / kilowatt / hour on the electricity costs for crypto mines. Local governments can increase the price increase at their discretion.
The notice was also signed by the Central Propaganda Department, Central Network Information Bureau, MIIT, MPS, PBOC, Treasury Department, Tax Administration, General Market Inspectorate, CBIRC and the National Energy Council.
UPDATE (24 SEPT. 12:11 UTC): Adds details from NDRC’s statement on the mining crackdown.
UPDATE (SEPT. 24, 14:10 UTC): Rewritten heading.