Electricity Price Hike Only A Supporting Punishment as Crypto Activities Remain Illegal in China
On February 22, the Zhejiang Government Service Center put out a statement to clear the air over the price hike of electricity bills for anyone found to be involved in cryptocurrency mining. The policy, since it was enacted, has left a lot of people confused. In some quarters, the conversation has been that cryptocurrency mining wasn’t completely illegal in China, as long as you can afford to pay the required electricity bill.
The Zhejiang Provincial Development and Reform Commission had earlier issued a notice concerning a new policy that revolved around varying electricity bills. The target at the time was to discourage the activities of users engaging in cryptocurrency mining activities.
It is well known that electricity investment for cryptocurrency mining is capital intensive. This was one of the major reasons why the majority of early crypto miners settled in parts of China. They took advantage of the relatively affordable electricity to carry out their activities. Due to China’s carbon neutrality goals, financial scrutiny, and other important reasons given by the government, cryptocurrency activities were declared illegal in the country, including mining.
With intensified enforcement of the ban in 2021, several crypto practitioners migrated out of China to regions that were more accommodative of their activities. However, several others remained behind, carrying out their activities in secret. China has not relented in trying to fish out these underground practitioners, and the hike in electricity prices is explained to be one of the measures to clear them out.
The statement released by the Zhejiang Government Service Center explained that the hike in electricity prices is simply a supporting punishment for anyone found to be involved in cryptocurrency mining activities. It is not an approval to carry on with such processes, as has been rumored in several circles. As far as China is concerned, cryptocurrencies and activities around it are illegal and remain so.
The price standard is not uniform, it differs from one province to another. In Zhejiang province, anyone found to be engaging would be charged 0.5 yuan per kilowatt-hour, Inner Mongolia charged 1 yuan while the charge in Hainan province is 0.8 yuan under similar circumstances.
These charges remain additional punishments to already existing state sanctions, and not an alternative or approval measure to mining activities. For offenders who hide behind other legitimate energy-consuming exercises to mine cryptocurrencies, when found, the special billing will not segregate between their legitimate practice and the illegitimate crypto mining. Rather, their total billing will be at the rate of the hiked price. This will be part of the punishment that they will have to serve.
Before the ban on cryptocurrency activities in China, the country accommodated over 60% of the global Bitcoin hashrate and was known as the Bitcoin mining hub of the world. However, as a result of the ban and subsequent enforcement, a lot of crypto practitioners, especially miners have been forced to either shut down or relocate. Any remainder of them within China are doing so undercover, and the government appears to be unrelenting in ensuring that they are completely halted or expelled.
Also recently, for the first time, the Supreme Court of China has included virtual currency transactions in the judicial interpretation of illegal fundraising, which is mainly to punish the behavior of absorbing funds in the name of virtual currency.