Here's why China intensified crackdown on cryptocurrencies despite being world's largest mining hub

Despite being the largest bitcoin mining hub in the world, China has intensified its crackdown on cryptocurrencies and banned financial institutions and payment companies from providing crypto services to customers, news agency ANI reported.

A joint notice was issued by three financial self-regulatory bodies on May 18 announcing the ban directly or indirectly on providing cryptocurrency services to customers, which also includes accepting cryptocurrency as payment, Nikkei Asia reported citing local media.

The news of the crackdown had sent cryptocurrency prices tumbling, from $63,000 in mid-April to $39,000 on May 19.

The move comes following the Inner Mongolian Autonomous Region’s announcement that it has set up a platform for residents to report “illegal projects”.

Notably, the Inner Mongolian Autonomous Region had recently started campaigning about stamping out cryptocurrency mining to reduce carbon emissions.

China, in general, has held a negative stance on cryptocurrencies for long over concerns of the potential risks it poses to the domestic financial system. In 2014, China’s financial regulators had banned financial and payments institutions from carrying out bitcoin-related transactions.

However, China continues to dominate the global bitcoin mining network, which, according to the Center for Alternative Finance (CAF) at the University of Cambridge, consumed more power in 2019 than the whole of Argentina.

Another study conducted last month stated that China’s energy consumption from bitcoin mining in 2024 would exceed the total energy consumed in nations such as Italy. Moreover, carbon emissions from China are expected to top the annual greenhouse gas emissions of Spain and the Netherlands by that time.

As per the CAF, from September 2019 to April 2020, China’s consumption of computational from bitcoin mining accounted for almost 65 percent of the world’s total bitcoin hash rate.

Even globally, concerns over the energy intensity of cryptocurrency mining have been raised. Tesla boss Elon Musk, for instance, announced that crypto payments will not be accepted for car purchases due to concerns about the use of fossil fuels for bitcoin mining and transactions, even though he has publicly endorsed bitcoin several times.