Money and Markets

China now world's 2nd-biggest bitcoin miner after activity bounced back from government's crackdown

Business Insider US

Bitcoin and China. NurPhoto/ Getty Images
Bitcoin and China. NurPhoto/ Getty Images
  • China has re-emerged as the second-biggest bitcoin miner after the US, despite Beijing's ban on crypto activity.
  • A surge in covert operations has made it a major mining hub again, the Cambridge Centre for Alternative Finance found.
  • China's crackdown resulted in a swift drop in global bitcoin mining, which has now recovered to hit all-time highs. 
  • For more stories go to www.BusinessInsider.co.za.

China has made a comeback as a global bitcoin mining powerhouse, despite Beijing's crypto crackdown.

Research by the Cambridge Centre for Alternative Finance found a surge in covert mining operations post-ban means the country is now the world's second-largest location for bitcoin mining, behind the US.

"In China, following a sudden uptick in covert mining operations after the June 2021 government-mandated ban on Bitcoin mining, the country has re-emerged as a major mining hub," the CCAF said in its report published on Tuesday.

China was the leading bitcoin miner until its government in October completely banned mining by making all cryptocurrency-related business activity illegal in the country.

But Beijing's efforts to clamp down on bitcoin mining prompted a sharp rise in underground activity, according to the research.

Chinese bitcoin miners were the source of 21.11% of the global hashrate, the researchers noted in their study of the period between September 2021 and January 2022.

"This strongly suggests that significant underground mining activity has formed in the country, which empirically confirms what industry insiders have long been assuming," the report said.

"Access to off-grid electricity and geographically scattered, small-scale operations are among the major means used by underground miners to hide their operations from authorities and circumvent the ban."

In bitcoin mining, high-powered computers solve complex puzzles to mint new coins and secure the network. The hashrate reflects the computational power used by a proof-of-work cryptocurrency network, like bitcoin, to process transactions in a blockchain. It can also reflect how fast a cryptocurrency miner's machines complete computations.

The Chinese government ban resulted in an immediate decline in the global hashrate total, but this quickly reversed as miners shifted abroad, according to the report.

"By the end of 2021, total network hashrate had almost fully recovered to pre-ban levels," it said. "The upward trajectory continued in early 2022, and culminated in a new all-time hashrate high."

The research found the US accounted for 37.84% of the hashrate. Russia has seen a substantial drop in its share, from 11.23% in August to 4.66% by January.

Kazakhstan became a destination for crypto miners fleeing the Chinese ban, driving a rise in hashrate share to 18.10% in August. But strict rules introduced by its government to counter power shortages drove its share down to 13.22%.

China's harsh clamp down on crypto reverberated across the industry, and provided the US with the opportunity to get ahead and become the world's biggest bitcoin miner for the first time.

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