A bitcoin mine near Kongyuxiang, Sichuan, China on August 12, 2016.
Paul Ratje | The Washington Post | Getty Images
Bitcoin fell Monday on reports that China stepped up its crackdown on cryptocurrency mining.
The world’s largest digital currency fell 7% Monday morning to a price of $ 32,801 and fell below $ 33,000 for the first time since June 8, according to Coin Metrics. It last traded at $ 33,243 at 5:50 a.m. ET. Smaller competitors like Ether and XRP also fell 8% and 7%, respectively.
According to a report by the Communist Party-backed Global Times newspaper, many bitcoin mines in Sichuan were closed on Sunday after authorities in southwest China’s province ordered crypto mining to stop. It is estimated that more than 90% of China’s bitcoin mining capacity will be shut down, the newspaper said.
Bloomberg and Reuters also reported the move from Sichuan authorities. It follows similar developments in China’s Inner Mongolia and Yunnan regions, as well as calls from Beijing to stamp out crypto mining amid concerns over massive energy consumption.
Separately, China’s central bank announced on Monday that it had convened Alipay, the payment service of Alibaba’s subsidiary Ant Group, and some major banks, and asked them to take action against crypto trading. China had already banned financial institutions from offering crypto-related services.
China’s crackdown appears to have resulted in a significant drop in the hash rate – or processing power – of Bitcoin, which has plummeted over the past month, according to data from Blockchain.com. An estimated 65% of the world’s Bitcoin mining is done in China.
Bitcoin’s network is decentralized, which means it has no central party or middleman to approve transactions or generate new coins. Instead, the blockchain is maintained by so-called miners who use specially developed computers to solve complex mathematical puzzles in order to validate transactions. Whoever wins this race will be rewarded with Bitcoin.
This power-intensive process has fueled growing concerns about the potential environmental damage Bitcoin may have, with everyone from Tesla CEO Elon Musk to US Treasury Secretary Janet Yellen sounding the alarm. China, where most of Bitcoin mining is concentrated, is heavily dependent on coal power. Last month, a coal mine in the Xinjiang area was flooded and shut down, taking almost a quarter of Bitcoin’s hash rate offline.
However, miners in China often migrate to places like Sichuan that are rich in hydropower during the rainy season. And some industry efforts have been made – including the Bitcoin Mining Council and the Crypto Climate Accord – to reduce the carbon footprint of cryptocurrencies.