A proposed ban on bitcoin mining in China, may be set to have “a substantial impact” on cryptocurrency prices as miners look to develop new global infrastructure.
Authorities in China are reportedly considering a ban in response to environmental concerns about the computing requirements of mining cryptocurrency. The National Development and Reform Commission (NDRC) in China, which acts as the country’s economic planning agency, announced a revised list of 450 industrial activities that it hopes to either encourage or eliminate, with cryptocurrency mining among those earmarked to be phased out.
Experts suggest that the loss of mining operations in China could have a significant impact on bitcoin’s price, and potentially deliver positive news for bitcoin investors.
“If this ban does end up happening, it is more likely to push bitcoin prices up than down,” Mati Cgreenspan, market analyst at trading platform eToro, said.
There is no set timetable for bitcoin mining to be eliminated and a public consultation will be open until 7 May. If implemented it could have a profound impact on the bitcoin network, as China is home to the majority of global bitcoin mining operations.
China’s cheap energy, which is largely powered by coal-fuelled power plants, make it a profitable location for bitcoin mining – the process of generating new units of the cryptocurrency by solving complex computational puzzles.
Current estimates suggest bitcoin mining consumes more electricity than the entire nation of Ireland, which climate scientists say could push global warming above 2C in just two decades.
“The loss of cheap Chinese electricity would raise the mining cost, which is net positive on price,” Cgreenspan adds.
Other experts pointed to the effect the ban would have on bitcoin’s global infrastructure.
“If local authorities begin targeting mining farms, this could have a substantial impact on bitcoin’s global infrastructure,” said Matt Hawkins, CEO of mining software company Cudo Miner. “People talk a lot about the risks of a 51 per cent attack, but the problem with accumulating so much centralised hash power in areas such as China is that – should it be turned off – the bitcoin network’s performance will be harmed.”