China Crypto Roundup (April 27 – May 5): Local Government Supports Bitcoin Mining, Bitmain Recovers
The cryptocurrency sphere this past week has seen big momentums with bitcoin price rose to take $9,000 again. The Chinese crypto space is also moving forward with positive developments: a city in “bitcoin mining capital” Sichuan encourages crypto mining operations to help consume excessive hydropower in the upcoming rainy season; Bitmain claims profits despite the coronavirus pandemic and dismal reports; former Bank of China president talks about digital yuan.
Chinese officials support renewable energy-powered crypto mining
Chinese officials from the Ya’an city of Sichuan has issued a guideline encouraging crypto mining operations to help consume the excessive hydroelectric energy during the flood season. It is the first time a local government openly support crypto mining since 2018.
Prior to it, the country mainly held strict regulations towards cryptocurrency and mining industry.
In September 2017, China has shut down online bitcoin trading platforms within its territory.
In January 2018, the central government requests local governments to guide enterprises to exit the crypto mining business and to report regularly on the progress of their work.
The country kept up the pressure on the mining industry with a 2019 draft listing crypto mining as an industry to be eliminated, but it was deleted from the later released official version in November.
China, as a major player in the cryptocurrency mining industry, seems to be turning neutral in the attitude towards the industry. And local governments, especially those in southwestern China, are supporting crypto mining, either explicitly or implicitly, because of poverty and energy surplus in these areas.
Bitmain earned over $300 million in revenue this year
Chinese cryptocurrency hardware manufacturer Bitmain, with a reported over $300 million in revenue in the first four months of 2020, seems to be bouncing back despite the coronavirus outbreak and recent rumors about in-house problems.
Further, the company is said to reward its employees with individual bonuses of up to 70,000 yuan (roughly $10,000) on the Labor Day. In January this year, the company has just conducted massive staff layoffs.
In face of the COVID-19 outbreak, other bitcoin mining equipment makers like Canaan and Ebang have lowered their expectations in 2020, the remarkable performance of Bitmain comes as a surprise given that the company is considered one of the biggest victims of the crypto winter.
Apart from the above mentioned job cuts after cofounder Jihan Wu regained control of the company, Bitmain has lost a noticeable market share to its latest challenger MicroBT in 2019. Other recent dismal news about the company includes reports suggesting that its Antminer S17/T17 machines have a high failure rate, and legal lawsuits between the two confounders.
Former Bank of China president talks about digital yuan
China’s digital yuan, currently in the test phase, has been generating excitement among Chinese internet users. Searches of the digital yuan and cryptocurrencies in social networks have soared in these days.
Li Lihui, the former president of Bank of China, thus gave a livestreaming talk on May 5, saying that digital currency will play a core role in the future global digital economy competition.
Unlike WeChat Pay and Alipay, Li explained that the digital yuan is designed to be independent of any network or third-party bank. However, for the digital yuan to replace cash or other current payment solutions, four key conditions needed to be met:
“Whether the digital Yuan can become the dominant form of currency and mainstream payment means, depends on whether it has greater efficiency, lower transaction costs, enough economic scale with commercial value, and people’ acceptance.”
When asked about investments in bitcoin-like cryptocurrencies, Li holds a negative attitude saying that it is quite speculative and investors should be cautious.