China’s Proposed Ban on Bitcoin Mining Could Be a Boon for Smaller Miners in the ‘Gray Zone’

A proposal by China’s top economic planning body to eliminate bitcoin mining in the country has caused quite a stir in the crypto world. Some insiders believe the regulation of mining  could help smaller miners who operate in provinces with cheap electricity gain a competitive edge.

The National Development and Reform Commission (NDRC) on Monday added cryptocurrency mining to more than 450 activities that the agency said should be phased out as they are deemed to be unsafe, wasteful of natural resources, or pollute the environment. The draft list of these industrial activities the NDRC is seeking to eliminate is under public consultation until May 7.

China is the world’s largest market for computer hardware designed for mining bitcoin and other smaller PoW cryptocurrencies and home to the world’s largest crypto mining farms. The proposed rules may end the country’s dominance in the energy-hungry but lucrative industry.

China-based miners contend bitcoin mining activities will not be phased out immediately and it could take time for the mining ban to have much impact, according to a report from Odaily.

“It will typically take months before officially carrying out the policy, and will take at least 3 years for the government to fully rein in bitcoin mining operations across the nation,” said Chen Lei, head of the blockchain club at Peking University.

The ban, if carried out, will undoubtedly deal a massive blow to large mining farms, but is considered as a boon for smaller miners in the country. Even if the central government orders to stop crypto mining activities, local governments have unfettered power to implement what’s outlined in the NDRC’s policy guide.

Local governments, especially those in underdeveloped provinces and regions with abundant and cheap electricity, will find the ban conflict with local interests. Therefore, they will possibly give green light to some small-scale mining farms in an effort to boost local revenue .

With the ban which is expected to prohibit new miners from entering the space, those smaller miners who have a close rapport with local government officials may benefit from the move because they can gain easy access to cheap, plentiful and reliable electricity without competition from dominant players.

In addition, the mining ban still has many positive implications for Bitcoin.

China’s blockchain expert Liu Changyong told 8BTC in a recent interview that the proposal would have no significant impact on the overall development of cryptocurrencies as the virtual currency is immune to the changes in mining costs thanks to their limited supply.

Some crypto analysts even see the news a bullish sign, saying the proposal, if passed, may make the bitcoin network more decentralized and thus safer in general, and could drive up the price of bitcoin.

The exit of large mining farms from China will reduce the mining difficulty, while increase the profits for remaining miners. Therefore, crypto mining gear manufacturers such as Bitmain and Canaan Inc possibly see a growing demand for their mining rigs from buyers abroad, compensating for the loss they suffered in the Chinese market.

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