China's ban on Bitcoin mining factories in Sichuan province is no longer news to anyone in the crypto space. This development has prompted an exodus of miners seeking asylum overseas for their mining equipment. The record has it that 90% of the country's mining capacity will be shut down due to the recent ban. This is an important period in the crypto space because Chinese miners produced almost 80% of global cryptocurrency transactions.
While mining regulations have brought FUD (fear, uncertainty, and doubt) to global crypto markets, causing the price of Bitcoin to plummet, cryptocurrency experts and analysts remain optimistic about how this development will affect the long-term life of bitcoin. The miners' ban could be a fair deal for Bitcoin when we look at it critically.
Although mining activities have been restricted Bitcoin is not banned in China. As of now, there's no law enforcement requiring Chinese citizens to relinquish their Bitcoin to the government. The ban on Bitcoin mining and restrictions to use have been widely exaggerated, but it is important to note that there has been no direct ban on bitcoin and other cryptocurrencies in China as of the time of writing.
China's government problem with Bitcoin is largest due to the concern about the growing popularity of cryptocurrency by banks because it is a direct challenge to economic and national financial stability. Through the development is causing a downward trend in the crypto market, it's not entirely something new. The recent crackdown on financial institutions that support crypto payments could be traced to the regulation from 2013 and 2017.
While China has ban financial institutions from dealing with crypto exchanges some of the stated rules could be diverted in the same way as they have been. Chinese citizens are likely to look for ways to avoid restrictions and keep trading Bitcoin using foreign-based trading platforms as long as the platform is legal.
Bitcoin has been seen to appear more centralized with about 60% of mining activities concentrated in Sichuan. Miners' exodus from China can lead to a more decentralized Bitcoin mining network.
While the miners migrate to find a new home in safer countries, this could disrupt the crypto market in the short term. However, in the long run, the expansion of the power supply will further make the Bitcoin network less vulnerable to the laws and regulations of any one country. As miners are now forced to relocate to other countries, the spread could help alleviate previous concerns over China's mining rule. The risks and problems of mining will decrease much if the miners themselves become more widespread. And with this exodus, that’s exactly what we can expect.
We cannot forget Elon Musk's announcement in May that his company, Tesla, would no longer accept bitcoin as a payment method until the mining industry reached 50% clean energy consumption. Then again, the American senator Elizabeth Warren (D-Mass.) June Broadcast criticizing bitcoin for its negative environmental impact, demanding the expansion of regulations surrounding the mining industry. Energy consumption and environmental impact have been major issues involving Bitcoin mining.
With the exodus of Chinese miners expected to other countries, we are likely going to experience green mining energy.
The United States seems likely to be the destination for a larger portion of Chinese miners. This migration could be a positive step in reducing bitcoin's footprint. It is on record that North American miners use a wider range of energy sources compared to Asia-Pacific miners and tend to be less reliant on fossil fuels such as coal.
North America also has many incentives to provide miners with renewable energy, both in the free market and in government legislation because the excessive use of energy in the mining industry continues to be the public scrutiny of the United States.
More reason for North America being a perfect location could be the meeting led by Musk with the North American Bitcoin Mining Council and Micro Strategy CEO Michael Saylor, a group committed to improving the visibility of the United States and the use of renewable energy in bitcoin mining and opposing the natural image of bitcoin.
North American regulations will not be as strict as the Chinese. The addition of cryptocurrency regulative requirements included in President Joe Biden's 2022 budget shows that the country is moving forward in a future where crypto can be rightly regulated but not completely banned.
Final thought
The Chinese mining ban and restriction of crypto trading are the many gripes investors have always had in the crypto space as a whole. With all the promise, innovation, and technology that the digital age brings, there will always be obstacles, such as government control, and ban. But these, according to experts are considered short-term barriers to long-term gain that have the potential to strengthen cryptocurrencies like bitcoin in the long run.
I believe with time Government bans are restrictions are only delaying the inevitable truth. With the relocation of miners to the states. I believe in few months time things will be back to normal