The short-lived bitcoin mining industry is already on the cusp of being shut down by Chinese authorities following concerns at the heavy demand the sector is placing on the electricity grid.
According to reports in the Financial Times, a task force has instructed local governments across China to “actively guide” companies involved with the mining of cryptocurrency to close their operations.
Beijing has already outlawed initial coin offerings and has closed all active bitcoin exchanges in China. Many bitcoin miners are operating in remote areas through unregistered firms, and it is estimated that at least 75% of the world’s bitcoins are mined in China, where the enormous supply of electrical power is often relatively inexpensive. Much of this activity is now likely to relocate to countries further north, including Russia and Iceland, where the cooler climate enables computers to operate more effectively, and avoid overheating.
Bitcoin mining draws upon industrial supplies of power to decode complex mathematical equations in order to validate new, and highly secure, transactions of bitcoin recorded via the blockchain leger.
The Chinese clampdown comes against a backdrop of regulatory moves against bitcoin, with South Korea also planning to ban trading in the currency. The country has hitherto been one of the world’s biggest markets for bitcoin trading. The South Korean announcement prompted a further 14% drop in the currency’s value at the time of writing.