- China used to be the crypto capital of the world.
- Thanks to the cheap energy and friendly regulations, mining companies flocked to set up shop in the US.
- The country reluctantly is playing host to the energy-intensive process of creating coins and validating transactions.
In 2019, despite some regulation and a ban on initial coin offerings years prior, China’s leader, Xi Jinping, called for widespread implementation of blockchain technology to support the country’s quest for secure and reliable data systems, boosting blockchain research and further propelling China ahead of the US. At its peak, in 2021, the country accounted for almost 70% of global cryptocurrency mining.
But in May of that year, China changed course. Concerns about the use of cryptocurrencies for illegal activity resulted in an effective ban on crypto mining and transactions. Zongyuan Zoe Liu, a senior fellow at the Council on Foreign Relations, told me the ban stemmed from the risk that cryptocurrencies posed to China’s financial system through activities like money laundering. This sent the industry spiraling.
Mining companies immediately fled the country, many moving to nearby Kazakhstan, where there was an abundance of coal power. Since minting bitcoins requires solving increasingly complex math problems, the hundreds of specialized machines used in the process — along with the equipment to cool them — take a massive amount of electricity.
