Just last week, China once again declared that any cryptocurrency transactions conducted within its borders would be considered illegal, further tightening the noose around crypto miners. While the country has called cryptocurrencies, a threat to 'social order', there are immediate gains from these moves such as freeing up enough energy to power countries such as Finland, Chile, Belgium, and the Philippines, Quartz reported.
Since earlier this year, China has been consistent in implementing its policy against the use or 'mining' of cryptocurrencies in the country. While there were reports of China wanting to launch its own digital currency that could be used globally, the recent turn of events signals towards a singular goal - using electrical energy judiciously.
While the U.K. is reeling under gas shortages, China is facing a similar issue with coal. South China Morning Post reports that the country is heavily reliant on coal for its energy needs and has stocks that will last barely two weeks. As the pent-up demand for goods is unleashed ahead of the holiday season in the west, China's factories need more electrical power at a time when stocks are running low.
The Guardian reports that around 20 out of 23 provinces in China are facing a power shortage prompting factories to reduce working hours, shops being lit up by candles, and failure of mobile networks in some regions. Amidst all this, a ban on cryptocurrency transactions might seem irrelevant, considering they account for just 1.1 percent of China's power consumption.
However, as a Rystad Energy report from July this year details in absolute numbers, this 1.1 percent translates to 86 terawatt-hours (TWh) of electrical power, roughly the amount of energy countries like Finland or Chile consume in a year, or 84 of the world's lowest electricity consuming countries combined would need for a year, Quartz reported.
Rystad also states that 63 percent of China's energy needs are powered by coal and 65 percent of all Bitcoin mined in 2020 were mined inside Chinese borders. This means that 40 percent of all Bitcoin mined has been powered by coal. Cryptocurrency mining operations in China were thus responsible for 57 metric tons (Mt) of carbon emissions. With China pledging to become carbon neutral by 2060, these emissions were better nipped in the bud, and the crackdowns from earlier this year have clearly done that.
According to estimates of the Cambridge Bitcoin Electricity Consumption Index, global electricity consumption halved to 60 TWh in the month of June when China came down heavily on operations. Miners have found 'safer havens' and resumed operations spiking the consumption back to 98 TWh, Quartz reported. We only hope they have found some eco-friendly ones.