Despite a ban on mining, local entrepreneurs are actively mining new cryptocurrencies. Because of this, the country has regained its place in the top three states regarding cryptocurrency mining for 2021.
Immediately after China imposed a ban on cryptocurrency mining, which happened exactly one year ago, in June 2021, the volume of mined coins dropped to almost zero. However, after the first three shock months, local miners began to look for ways to circumvent the legislation. And they succeeded: according to a study by the Centre for Alternative Finance at Cambridge University, the country’s share in the global mining market exceeded 22% in September 2021. However, local miners still have to hide their location using VPNs and other services. It is not only the use of proxy servers that makes it difficult for Chinese authorities to find illegal farms. Cryptocurrency is mined without connection to China’s power grid, making it virtually impossible to trace the owners of the farms. Government propaganda isn’t helping: The Economic Daily’s call to close loopholes to circumvent the ban on mining cryptocurrencies has failed. Internet café operators, technology vendors, and government agencies are now taking advantage of these opportunities.
Experts note that some Chinese miners, immediately after the ban, moved to Kazakhstan, where mining is allowed. Because of this, Kazakhstan’s share of the global mining market rose to 18%. However, in late 2021 and early 2022, political tensions and power outages led miners to abandon the idea of developing their businesses in the country, with the state’s share falling to just over 13%.
Now, returning miners and new ones in China have brought the country back to second place in new cryptocurrency production. The state is now second only to America, whose share as of January 2022 was around 38%. However, the US share fluctuated throughout the year: in the second half of 2021, it accounted for 27% of all global mining. According to the study, the most active miners are mining coins in Georgia (about 31% of all US mining), Texas (more than 11%), and Kentucky (just under 11%).
Russia’s share of global new coin mining has fallen from around 11% to 4.66% in six months; analysts believe the drop is due to political risks and the country’s central bank’s unclear attitude towards mining. Although adopting a cryptocurrency regulation law shortly should improve the country’s market position, inexpensive electricity could attract new users to mining. However, with the adoption of the cryptocurrency law, electricity consumption is likely to be divided into residential and commercial, so the cost of mining may increase, and the final income of miners may decrease.