In a surprising move, China’s Communist Party has announced the legalization of Bitcoin mining for domestic entities and individuals. This marks a significant reversal from the 2021 ban, which was implemented due to concerns over capital flight, environmental issues, and competition with national digital currencies. The announcement coincides with escalating tensions with the U.S., particularly involving Chinese manufacturer Bitmain. U.S. Bitcoin miners have faced equipment seizures from customs, and profitability is diminishing for many local firms. Prior to the ban, it was believed that China accounted for up to 75% of the global Bitcoin hashrate, and even post-ban, estimates suggest it still has around 20%.
The re-legalization of mining raises fears of an increase in network hashrate, which could challenge American miners' viability. As the leading manufacturers of Bitcoin miners, including Bitmain, Micro BT, and Canaan, are situated in China, the U.S. might find itself at a disadvantage if export restrictions are placed on mining machines. Currently, the U.S. holds approximately 36% of the global hashrate, with Texas hosting 17%.
China has also been grappling with economic challenges stemming from its strict COVID-19 policies, real estate market downturns, and the broader global economic climate. Bitcoin may be seen as a potential avenue to revitalize its economy. The shift could indicate a broader change in China's stance on Bitcoin, potentially allowing it to stockpile the cryptocurrency and ultimately dominate the market.
There is concern that if the Chinese government restricts exports of mining hardware, the U.S. could lag significantly behind. The competition to enhance semiconductors in the U.S. is ongoing; TSMC is establishing chip manufacturing plants, but experts believe it could take some time to narrow the gap with Chinese manufacturers. Jason Les, CEO of Riot Platforms, highlighted that the decision by TSMC to suspend chip supply to Chinese firms would jeopardize Bitcoin’s decentralization and heighten geopolitical tensions.
The re-legalization of mining raises fears of an increase in network hashrate, which could challenge American miners' viability. As the leading manufacturers of Bitcoin miners, including Bitmain, Micro BT, and Canaan, are situated in China, the U.S. might find itself at a disadvantage if export restrictions are placed on mining machines. Currently, the U.S. holds approximately 36% of the global hashrate, with Texas hosting 17%.
China has also been grappling with economic challenges stemming from its strict COVID-19 policies, real estate market downturns, and the broader global economic climate. Bitcoin may be seen as a potential avenue to revitalize its economy. The shift could indicate a broader change in China's stance on Bitcoin, potentially allowing it to stockpile the cryptocurrency and ultimately dominate the market.
There is concern that if the Chinese government restricts exports of mining hardware, the U.S. could lag significantly behind. The competition to enhance semiconductors in the U.S. is ongoing; TSMC is establishing chip manufacturing plants, but experts believe it could take some time to narrow the gap with Chinese manufacturers. Jason Les, CEO of Riot Platforms, highlighted that the decision by TSMC to suspend chip supply to Chinese firms would jeopardize Bitcoin’s decentralization and heighten geopolitical tensions.
