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As the price of bitcoin has skyrocketed in recent days, the Iranian government has cut off the power supply to some illegal bitcoin miners, and this excitement has occupied the headlines of domestic blockchain media. As the price of bitcoin rises, the computing power also rises. According to authoritative data, as of July 1, the computing power of bitcoin mining has exceeded 69 hashes per second, indicating that investors' interest in bitcoin mining continues to increase. However, the actions of the Iranian government some time ago clearly tell us that Bitcoin regulatory policies affect the pace of Bitcoin mining. Although there is indeed pressure on mining regulation in some countries, the entire mining system is still relatively positive. But it is undeniable that price fluctuations and regulatory policies are still the main obstacles affecting mining. Based on Iran’s recent Bitcoin mining regulation, we have conducted an in-depth study of the regulatory policies of several countries where Bitcoin mining is relatively active, and analyzed and listed their positions and regulations on Bitcoin mining in the past few years.
Bitcoin mining regulatory policy
1. China’s Mining Regulatory Policy
The Chinese government has always been quite straightforward about Bitcoin mining. Currently, it is taking a tough approach to Bitcoin trading, such as banning Bitcoin trading, ICOs, and the opening of cryptocurrency exchanges.
But even in this environment, China's Bitcoin mining industry still occupies a major position in the world, and China's mining pools may reportedly account for 70% of the world's total mining volume. In addition, the global Bitcoin mining pool industry is mainly dominated by China. The reason may be that China has an oversupply of electricity. Especially in Sichuan Province, the capital of China's mining pools. It is reported that the oversupply of electricity in Sichuan mines has forced power plants to encourage companies to run mining equipment to make the best use of their resources.
In April 2019, a government agency proposed to ban mining. If this regulatory policy is implemented, China's leadership in the Bitcoin mining industry will be at risk.
This will be a fatal blow to Antminer, which produces the world's most popular ASIC mining machines. Bitmain also has its own mining operations in China.
Many reports in 2018 also showed that under the growing pressure of mining in China, many mining pool operators are looking for better mining sites overseas. It is understood that the main concerns of the Chinese authorities are environmental and tax issues.
2. Russia’s Mining Regulatory Policy
Compared to China, Russia has a more relaxed policy towards Bitcoin and cryptocurrencies, and they have not yet issued a clear regulatory stance on the field. Bitcoin is unregulated, but its use as a means of payment for goods and services is illegal. However, all this may change in the summer of 2019, as the Digital Financial Assets Act will come into effect.
Cryptocurrency mining operations in the country are currently continuing, with cold weather and low electricity prices being the main drivers, but a report in June suggested that mining operators could face fines in the future.
Anatoly Aksakov, chairman of the State Duma Committee on Financial Markets, told ITAR that cryptocurrencies created on open blockchains were considered illegal. At the same time, he stressed that if cryptocurrencies were purchased or acquired abroad, then holding them in Russia is not illegal.
3. Iran’s Mining Regulatory Policy
Previous news reports have shown that due to the sharp increase in electricity consumption in the past month, the Iranian government has taken a tough stance on Bitcoin mining, especially illegal mining. The Iranian Ministry of Energy believes that the abnormal increase in electricity consumption by 7% is caused by mining, and they are worried that the power grid will be overstressed, so they plan to reduce the rights of mining pools until new energy tariffs are passed.
Iranians currently receive a government subsidy that reportedly bridges the gap between what consumers are charged for electricity and what they actually consume. This situation provides a favorable environment for cryptocurrency miners. The mining ecosystem was given the stamp of approval in September 2018 after some Iranian government departments officially accepted Bitcoin mining as a legal industry in the country.
Given the activity and profitability of Iran’s mining business, Iran’s Deputy Energy Minister Homayoun Haeri said that Iran’s mining industry should be billed the same way as electricity export charges in June 2019. While everything sounded positive at the end of 2018, Iranian miners may face a few months of uncertainty until new policies on electricity tariffs are introduced.
4. Canadian Mining Regulatory Policy
Canada has been positioning itself as a Bitcoin-friendly country and has openly opened up shop for cryptocurrency mining. Canada has classified Bitcoin as a commodity, so users are obliged to pay taxes, depending on how they obtain and use the cryptocurrency. If Bitcoin is used as income, then income tax is required, and if it is just held, then there is also an obligation to pay capital gains tax.
Sources said that cryptocurrency mining is also taxed, depending on whether the business is run as a business or as a hobby. The latter is not taxed. Trading and using cryptocurrencies in the country is allowed but there are certain controls, especially for mining.
The move is mainly due to an effort by electricity supplier Hydro-Québec and the government energy regulator, the Régie de l'énergie. In May 2018, the Quebec government suspended the sale of electricity to cryptocurrency mining operators when 100 mining lines submitted power purchase applications to Hydro-Québec, reportedly consuming more than 10 terawatts per hour. Hydro-Québec operates 60 hydroelectric power stations and had a surplus of about 13 TWh at the time.
In June 2018, Hydro-Québec proposed rules that would require cryptocurrency mining companies to bid for electricity. Applications from these companies would need to be substantiated by business cases showing the jobs and investment involved in the initiative. Part of these rules would allow Hydro-Québec to force reductions in mining power during periods of increased electricity demand in the province.
Within a few months, the power supplier had to suspend processing miners' requests because the industry's electricity demand exceeded the supply at the time. Almost a year later, in April 2019, the Régie de l'Energie issued new rules for the industry that essentially solved the miners' electricity purchasing problem.
Hydro-Québec is required to allocate 300 megawatts to the blockchain industry, over and above the 158 megawatts already provided to existing customers and the 210 megawatts provided by municipal distributors. In order to receive this allocated power, mining companies must pass a screening process. The main evaluation criteria include the number of jobs created, the salary of the jobs, the investment valuation and the heat recovery.
5. Czech and Icelandic Mining Regulatory Policies
The Czech Republic’s policies are worth watching because it is home to one of the world’s largest mining farms, Slushpool. The mining pool accounts for 7.5% of the global hashrate. This European country has relatively lax regulations on Bitcoin and other cryptocurrencies. Its government does not consider Bitcoin as legal tender, but rather classifies it as an intangible asset.
Likewise, Iceland has become a hub for cryptocurrency mining due to its cold climate and abundant renewable energy. In February 2018, it was speculated that the industry’s electricity consumption would exceed the country’s total household electricity consumption. Genesis Mining is reportedly the largest energy consumer in Iceland.
6. U.S. Mining Regulatory Policy
Bitcoin mining is also well developed in the United States, which has adopted a fairly pragmatic regulatory approach. The Commodity Futures Trading Commission (CFTC) classified Bitcoin as a commodity in September 2015, and it remains a commodity. There are no specific restrictions on mining activities, although some states have taken different approaches to cryptocurrencies.
The city of Plattsburgh, New York, is probably the only place in the United States that has officially banned cryptocurrency mining. The move was formally proposed in March 2018 after local residents complained that cryptocurrency mining was causing rising electricity bills. The city is located near a hydroelectric power station, where electricity is cheap. Last March, it was reported that the largest mining farm in Plattsburgh was taking up 10% of the city's electricity. As a result, the Plattsburgh City Council implemented an 18-month ban on cryptocurrency mining.
Last year, a report by Crescent Electric Supply Company listed the electricity costs of mining one Bitcoin in each state in the United States. Louisiana is considered the cheapest place to mine Bitcoin. It is followed by Idaho, Washington, Tennessee and Arkansas. GigaWatt is the largest mining farm in the United States, located in Washington.
Global Bitcoin Mining Regulation
In fact, Bitcoin mining has become a global phenomenon, and the regulatory policies are also different. At present, there are still many countries that welcome Bitcoin, such as the Middle East. In addition, the electricity cost for mining in the Middle East is very cheap. According to the RHY mine, which has been deployed in the Middle East for more than two years, their mining electricity cost in the Middle East mine is as low as 0.19 yuan per kWh, which is much cheaper than the domestic mines during the flood season. Moreover, they are legal large-scale mines, and the land of the mines is bought out once and for a permanent period. The electricity is sent directly from the power bureau and the power is supplied by the State Grid. Many domestic miners who go overseas tend to choose legal large-scale mines like the RHY mine. Because the main factor in the site selection of large mines is affordable and cheap electricity. |
