A recent Cambridge report confirms that the United States currently leads the world in Bitcoin mining, raising questions about China's potential response. Despite the country's long-standing stance against cryptocurrencies, Chinese mining groups had previously controlled a significant portion of the global Bitcoin Hash Rate.
The current competitive advantage of the US and new trade policy hostilities could drive China to change. BeInCrypto spoke with representatives from The Coin Bureau and Wanchain to understand what might encourage China to shift its stance on digital assets.
US Surpasses China as Top Bitcoin Mining Center
The US has firmly established itself as the world's largest Bitcoin mining center. A recent report from the Cambridge Alternative Finance Center (CCAF) reveals that the US accounts for 75.4% of reported Hash Rate.
Global distribution of Bitcoin mining activities. Source: CCAF.This latest development confirms a notable power reversal in Bitcoin mining dominance. China had emerged as the world's top Bitcoin mining nation since 2017, leveraging extensive mining infrastructure and low electricity costs to contribute over 75% of global Hash Rate at one point.
However, the country subsequently cracked down on the industry.
China Tightens Cryptocurrency Regulations
In 2019, China's National Development and Reform Commission (NDRC) signaled an intent to ban cryptocurrency mining by releasing a draft law classifying it as an "unwanted industry".
Two years later, at least four Chinese provinces began shutting down mining operations. These crackdowns intensified due to concerns about excessive energy consumption.
By the end of 2021, the government declared all cryptocurrency transactions illegal, further solidifying the ban and prohibiting foreign exchanges from serving Chinese citizens.
However, China has proven capable of adapting to geopolitical changes that might threaten its economic dominance, and the current environment could present such a challenge.
Has Bitcoin Mining in China Really Stopped?
Despite China's official stance on cryptocurrencies, mining activities have not completely ceased in the region. In July 2024, Bitcoin environmental impact analyst Daniel Batten reported that the Hash Rate in China currently accounts for approximately 15% of the global total.
"Despite the official ban, the infrastructure remains available: from offshore mining to cross-border trading centers. With the growing global momentum behind cryptocurrency acceptance and the US leading, China might find itself incentivized to participate more strategically, even if not officially," Nic Puckrin, Co-founder of Coin Bureau, told BeInCrypto.
China also has geographical advantages over the US, particularly in technological advancements.
Cryptocurrency mining, especially for Proof of Work cryptocurrencies like Bitcoin, relies on Application-Specific Integrated Circuit (ASIC) devices to process complex calculations necessary for validation and mining.
China's position as the leading exporter of cryptocurrency mining hardware, especially to the US, gives them a potential advantage if they decide to revive their mining industry.
The ongoing tariff dispute between the two countries further increases uncertainty about the long-term cost-effectiveness of mining operations in the US.
Puckrin believes that the combination of trade friction and the US's strong push for cryptocurrency dominance could be enough to make China reconsider its position.
"It's unlikely China will openly change its stance on the mining and trading cryptocurrency ban in the near term. However, with US-based Miners increasingly occupying a higher percentage of Bitcoin's Hash Rate, China will certainly take notice and may be quietly reassessing its position," Puckrin told BeInCrypto.
However, China has other strategies beyond restarting the Bitcoin mining industry to undermine US dominance.
China's Subtle Approach Beyond US Influence
Although China opposes widespread cryptocurrency use domestically, they may still see value in digital assets to balance USD global dominance.
Many countries worldwide have been or are considering Central Bank Digital Currencies (CBDCs) to strengthen their domestic currencies. China is leading these developments.
"Despite the Bitcoin mining ban, China remains actively engaged in the digital asset space, through initiatives like CBDC research and the digital yuan or e-CNY," Wanchain CEO Temujin Louie told BeInCrypto.
In fact, China's efforts to create a digital yuan are partly driven by a desire to reduce USD dependence and lessen reliance on the US dollar.
Louie also suggested that any Chinese moves would not solely be based on what the US does or does not do.
"As usual, with China, a subtle approach is best. Any policy changes will not be due to US tariffs. Instead, China's decisions will be informed by global market trends and China's domestic strategy," Louie added.
This suggests that China's decisions about digital currency will affect how their cryptocurrency position continues to develop.
"The weakening of USD dominance, whether exacerbated or due to President Trump's tariff approach, could encourage China to become more aggressive in its international renminbi efforts, including the digital renminbi or e-CNY. Any changes to China's broader strategy will be reflected in their stance on cryptocurrencies," he concluded.
China's activities in other international trade areas have demonstrated how their policy changes are often very subtle.
Do China's Conflicting Cryptocurrency Policies Signal a Change?
Besides their appreciation for digital currencies like e-CNY, China's stance on cryptocurrencies has proven somewhat contradictory. These differences could raise the belief that the country might be ready to reverse – or at least soften – the complete ban on mining.
One month ago, investment company VanEck confirmed that China and Russia – two countries particularly affected by US sanctions – were reportedly settling some of their energy transactions using Bitcoin.
"With the US dollar increasingly being used as a political leverage – especially in taxed economies – other countries are actively seeking alternatives. In fact, many countries worldwide, including China and Russia, have been using Bitcoin as an alternative for trading in goods and energy, for instance. This trend will only accelerate as digital assets become a more prominent part of the global economy," Puckrin told BeInCrypto.
According to Puckrin's analysis of these indicators, China's "underground cryptocurrency economy" is expected to expand this year, which could lead to a reaffirmation of their power. This revival will primarily be in response to efforts to reduce dependence on the dollar, rather than a reaction to US mining dominance.
We may see this activity increase in the near future, especially as many countries use cryptocurrencies to bypass dollar-dominated systems," he concluded.
Deciphering China's intentions, especially regarding cryptocurrencies, will remain crucial by observing their actions rather than relying solely on official statements.
