Comment: Regulating cryptocurrency mining should consider waste water disposal factors to give new industries room

Wu said author | Colin Wu

Editor of this issue | Colin Wu

We support the country's regulation of behaviors that undermine financial stability, but we also hope that a rational analysis of the pros and cons can be made. Cryptocurrency mining is not completely "useless". For example, it can be used to reuse abandoned water, improve the finances and livelihood of poor areas, and develop chip technology. We hope that some space will be given to emerging things.

On May 21, the Financial Stability and Development Committee of the State Council (hereinafter referred to as the Financial Committee) held its 51st meeting and proposed to crack down on Bitcoin mining and trading activities and resolutely prevent individual risks from spreading to the social field.

On the evening of May 25, the Inner Mongolia Development and Reform Commission proposed to draft the "Eight Measures of the Inner Mongolia Autonomous Region Development and Reform Commission on Resolutely Cracking Down on and Punishing Virtual Currency "Mining" Behavior (Draft for Comments)" in accordance with the deployment requirements of the Financial Stability and Development Committee of the State Council. According to Jinshi Express on June 2, according to the requirements of the National Energy Administration, the Sichuan Supervision Office of the National Energy Administration will hold a virtual currency mining research seminar on June 2, and the meeting will report on the impact of shutting down mining on abandoned hydropower.

Since the price of Bitcoin has risen sharply since last year, and Musk recently called for the purchase of Dogecoin, a large number of retail investors have entered the cryptocurrency industry, affecting my country's financial stability. At this time, the three associations and the Financial Committee have spoken out one after another, and it is indeed necessary to remind investors. However, considering the complexity of emerging industries, industry insiders generally hope that decision makers can rationally analyze the pros and cons, regulate according to local conditions, and achieve a balance between stability, people's livelihood and development.

First, in the eight articles of Inner Mongolia, it is obvious that the local government has strictly cited various existing laws and regulations, highlighting the basic national policy and spirit of rule of law. However, some people also pointed out that the article "Enterprises and relevant personnel involved in virtual currency mining will be included in the blacklist of dishonest persons in accordance with relevant regulations" is a bit vague, and it seems that it is not legal to include people who participate in mining in the blacklist of dishonest persons, which may require further detailed explanation from the authorities.

Second, in the current Chinese legal system, it is not illegal for individuals to hold Bitcoin as a virtual commodity, and it seems that individuals using computers to produce Bitcoin is also "allowed unless prohibited by law." Whether new regulations or laws will be formulated in the future, or the current laws and regulations will be used to crack down on and restrict high energy consumption, non-collective, and pyramid schemes, etc., requires the promotion and interpretation of relevant legal departments.

Third, the carbon neutrality policy is a major national policy. However, some studies have shown that cryptocurrency mining can effectively consume the "wasted electricity" that is inevitably generated by the unstable power generation mechanism of new energy, which is conducive to new energy facilities to obtain more benefits and further expand construction, and in some aspects it is actually conducive to carbon neutrality.

Currently in the United States, Musk is involved in organizing the Green Mining Alliance, many companies have signed 100% green energy mining, and many mining companies have set up green energy funds, including Ethereum accelerating the transformation of POS, all of which are working hard to make the cryptocurrency industry "greener". Using more market-oriented rather than administrative means, such as the carbon credit system, may be a better choice.

Fourth, according to China Energy News, water abandonment in 2020 mainly occurred in Sichuan Province. From 2015 to 2019, the power stations under the State Energy Dadu River Company alone abandoned more than 40 billion kWh of water. In addition to consuming abandoned water and electricity, mining is beneficial to local fiscal employment. At present, the main buyers of Bitcoin are American institutions. In fact, Chinese miners are using abandoned water and electricity to earn American funds and pay domestic electricity bills.

In addition, the mining industry has driven the development of high-performance chips. Currently, the only company in China that mass produces TSMC’s 5nm and 7nm chips is Bitmain, a mining machine company. The company mainly sells its machines to North America, cultivates chip talents in China, and pays a lot of taxes to feed back the development of independent AI chip technology.

Fifth, as Li Bo, deputy governor of the central bank, said before: Cryptocurrency is an investment tool or alternative investment. Many countries, including China, are also studying it. Before we figure out what kind of regulatory rules are needed, we will continue to maintain the current measures and practices. When talking about the future development of e-commerce, Premier Li Keqiang emphasized: We cannot kill emerging formats with one blow. We should control the risks that should be controlled as much as possible, but we should also give them room for development.

At present, the cryptocurrency compliance system in developed countries is still being promoted, but the direction of compliance is the same. Considering the high financial risks and social stability pressure in my country, it is completely understandable that the current attitude of mainly restricting is adopted. However, as a fine tradition of my country, "crossing the river by feeling the stones", avoiding a one-size-fits-all approach, leaving a certain space, and balancing the relationship between supervision and development are also what decision makers need to consider.

refer to

1. Musk criticizes the use of coal in mining. What does the paper he supports, "Bitcoin is the key to clean energy," say?

2. Review after 521: What are the upper and lower limits of the policy? Real news and rumors about short selling

3. The first shot after 521: What information does Inner Mongolia’s “new eight measures” to crack down on mining reveal?

Risk Warning

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