Bitcoin Mining Resurges in China, Quietly Defying Government Ban

TLDR

• China’s Bitcoin mining has surged to 14% of global hashrate despite the official ban on crypto activities.
• Regions like Xinjiang and Sichuan have become key hotspots for Bitcoin mining due to cheap and unused electricity.
• Local miners are utilizing overbuilt data center infrastructure to support growing mining operations.
• The increase in Bitcoin prices has provided a strong incentive for miners to return to the industry.
• Bitcoin mining equipment sales have surged, with Canaan reporting a significant rise in revenue from China.

China has quietly become a leading player in global Bitcoin mining again, despite a formal ban in place since 2021. The country now contributes about 14% of the global Bitcoin mining hashrate. Regions like Xinjiang and Sichuan are seeing a surge in mining activities, with authorities turning a blind eye. This resurgence follows a sharp decline after China’s ban on cryptocurrency trading and mining three years ago.

Energy-Heavy Regions Powering Bitcoin Mining

Bitcoin miners in China are flocking to areas where electricity is cheap and often unused. In Xinjiang, local miners are exploiting abundant energy resources that cannot be transmitted elsewhere. “A lot of energy cannot be transmitted out of Xinjiang, so you consume it in the form of crypto mining,” said Wang, a miner in the region. The cheap electricity in these regions makes it highly attractive for miners to set up operations despite the ban.

Miners are tapping into the infrastructure that was previously built for data centers in these regions. According to an anonymous source at a major mining rig maker, some Chinese cities are repurposing these unused resources for Bitcoin mining. This shift allows miners to access cheap energy while bypassing government-imposed restrictions.

The lack of enforcement has led to rapid growth in the mining industry. In some areas, new mining projects are being constructed to keep up with the rising demand. “People mine where electricity is cheap,” said Wang, explaining the ongoing trend.

China’s Bitcoin Mining Despite Policy Restrictions

Favorable economic conditions have spurred a comeback in Bitcoin mining in China. Local energy prices are well below international rates, making mining operations more profitable. This has allowed miners to continue operating even with the official ban still in place. “Bitcoin mining is still officially banned in China. However, there continues to be significant capacity operating,” said Julio Moreno, a researcher at CryptoQuant.

The surge in Bitcoin prices has also contributed to the resurgence. Pro-crypto policies in the U.S. partly drove the October price increase Despite Bitcoin’s price drop since then, miners in China are still seeing high returns. This profitability has drawn miners back to the industry, even as the Chinese government continues its official stance against crypto mining.

Canaan, a leading Bitcoin mining rig maker, saw over 30% of its revenue come from China in the past year. This is a significant rise compared to previous years, highlighting the growing demand for mining equipment. The company attributes this spike to rising Bitcoin prices and tariff issues affecting U.S. buyers. They have not commented on the country’s mining policies but have emphasized that their operations in China are legal.

Hong Kong’s Stablecoin Law Signals Change

Despite the official ban, signs of policy flexibility in China have been emerging. Hong Kong has introduced a stablecoin law that allows it to regulate crypto tied to fiat currencies. Beijing has also shown interest in developing yuan-backed stablecoins to expand China’s influence globally. These moves suggest that China’s approach to cryptocurrency, including Bitcoin mining, may be softening.

Liu Honglin, a legal expert, believes the government may gradually relax its stance on mining. “You simply cannot stop such activities completely,” Liu said. As economic incentives in specific regions continue to outweigh the risks, China’s role in global Bitcoin mining will likely grow further.

Bitcoin mining continues to thrive in regions of China despite the official restrictions. With low energy costs and a shift in government attitudes, miners are finding new ways to operate. This development highlights the resilience of the crypto mining industry amid regulatory challenges.

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