Mining — on again, off again, back on again in China. That is not the mining of which one might think — not the stuff that comes out of the ground, like metals and coal, but bits and bytes.
Reports came on Wednesday (Nov. 6) that the Chinese government has stepped back from banning the mining of bitcoin and cryptos. Call it the ban on the ban.
The ban, of course, means that digital currency makers would be “off” the list of industries restricted from getting subsidies from government entities. The digital mining industry was conspicuously absent from the list, where it had appeared this past April, and which was disclosed through the Industrial Structure Adjustment Guidance Catalog.
The move should come as no surprise, given the public support of the country’s president, Xi Jinping, for blockchain development. Blockchain, of course, is the technology that underpins crypto transactions, and exchanges of other digital properties. China is also is reportedly gunning to release a digital version of the yuan.
What might seem to be bullish news for bitcoin — on the face of it, anyway — was coolly received by those who trade bitcoin. Consider the fact that, at this writing, the price of bitcoin was actually down to about $9,311.
China has still cracked down on exchanges, and has banned initial coin offerings (ICOs). However, by allowing firms that make bitcoin and other cryptos to operate, the implication is that the country wants to remain the largest source (geographically speaking) of bitcoin. According to Cryptovest, Chinese firms mine as much as 60 percent of bitcoin blocks.
The decision to abandon the ban comes, of course, as mining giant Canaan Creative has filed for an initial public offering (IPO) with U.S. authorities. It seems incongruous that the government would curtail the industry that would keep Canaan Creative afloat.
There’s another strategy that may be behind the decision to let miners mine, through servers and continued (relatively) cheap electricity. By dominating the means of production, China also has the means to dominate crypto in an arms race that comes through digital currency, especially if the state-issued digital yuan is launched. In this respect, the miners and the government can work in concerted effort to get to market ahead of other would-be cryptos aiming for a world stage, such as Libra.
The People’s Bank of China has a vested interest in the yuan being used beyond China’s borders. Currencies, after all, work best when they are international in scope, and have good liquidity. By freeing up the lines of production, China seems to be girding for battle.