Three months have passed since the People’s Bank of China (PBOC) issued an official statement explicitly defining initial coin offerings (ICOs) as illegal public financing activities. As a result, all China-based ICO projects were required to refund all initial investments, regardless of whether or not project-based tokens were issued; foreign-based projects were required to refund investors as long as the tokens had not been issued; and more importantly, all China-based bitcoin exchanges, including Huobi, OKCoin and BTCC, shut down. The reason given for shutting down: pressure from “related government departments.”
Pessimists believed this would herald the end of Bitcoin in China — and even around the world — a sentiment that has been enhanced by the astonishing plummet of bitcoin price on Chinese exchanges from around $7,400 to as low as $2,400. And, as usual, whenever rumors float out of China, markets react — whether those rumors are based entirely, partially or not at all in truth.
As bitcoin exchanges in China shut down, public trading volumes of Chinese Yuan became literally zero; therefore, any news from China related to Bitcoin should be irrelevant to the price. Bitcoin’s ferocious bounce-back to nearly $8,000 in mid-November 2017, an all-time high, confirmed the point that no matter what is going on in China and regardless of Chinese hurdles, the price of bitcoin will continue its ascent.
But there is an exception: mining.
Will Mining Be Shut Down?
China is still the largest host country for mining facilities. Indeed, 70 percent of hash power globally comes from Chinese mining pools. The miners produced by Chinese company Bitmain dominate the whole industry.
People worry about whether the Chinese government will ban mining, thereby eliminating Bitcoin from China at its source and throwing the ecosystem into disarray. However, this is highly unlikely.
The recent rumor that a mining ban is becoming a reality was derived from a flyer, distributed by a power station in the Chinese province of Sichuan. The flyer stated, “Bitcoin is illegal thus the company shall not provide electricity to mining facilities.”
In fact, this flyer is nothing more than a poorly worded, company-level notice that mistakenly used the word “illegal.” The content, however, has since been misconstrued as proof of an official ban on Bitcoin mining…