China proposes cryptocurrency mining ban as prices start to rise again

The government agency that is in charge of China's macroeconomic planning is recommending new rules that would effectively ban cryptocurrency mining in the country, or at least make it very difficult, provided the measures are actually enforced.

China's National Development and Reform Commission (NDRC) outlined the proposed decree in a draft amendment to the Catalog for Guiding Industrial Restructure, as reported by South China Morning Post. It's sort of an outline of economic policy that groups industrial sectors into three main categories: ones the agency wishes to encourage, restrict, or eliminate.

The amendment recommends eliminating "virtual currency mining, such as the production process of Bitcoin" right away. Residents in China have until May 7 to submit feedback on the draft proposal, sometime after which the rules would be finalized (or scrapped).

Bitcoin is mostly mined on ASIC hardware these days, meaning there is not the direct threat of miners exhausting the supply of graphics cards, as happened a couple of years ago. However, there are a couple reasons why this proposed ban matters.

For one, cryptocurrencies that are mined with GPUs are often exchanged for Bitcoin, so there is some potential spillover. Secondly, Bitcoin and other cryptocurrencies have seen a recent surge in pricing.

Bitcoin is currently trading for over $5,000. That's a long way from its peak of around $20,000 for a brief moment in 2017, but it also recently hit its highest point (around $5,200) since November of last year.

It's not just Bitcoin, either. Ethereum is up to around $165, which is also the highest it's been since last November. Likewise, Litecoin and others are up as well.

Should we be worried about another GPU shortage, caused in part by crypto-mining? Probably not. Well, maybe not. Okay, hopefully not. It's hard to tell, because the cryptocurrency market is so damn volatile.

As for China's proposed ban, CoinDesk disputes that calling it as such is the correct nomenclature. CoinDesk says it's "misleading" to refer to the proposed rules as an outright ban, and that "the reality is more nuanced." Even though local governments would be required to implement what's outlined in the NDRC's policy guide, they must use related laws and regulations, and not the provisions themselves, in order to take forceful actions to shut down mining operations.

Maybe so, maybe not. Either way, it's clear China is not a fan of crypto-mining. Also, CoinDesk seems to be coming at this from another angle that is not universally shared. Michael Zhong, an analyst with TokenInight, believes the rules will have a big effect on China's position as hotspot for crypto-mining.'

"Bitcoing mining will no longer be dominated by China be become more decentralized," Zhong told SCMP.

We'll have to wait and see how it all plays out. In the meantime, we're crossing our fingers that there is not a second coming of the crypto-mining gold rush that helped jack up the prices of high-end and midrange GPUs.