Bitcoin mining hub in China to shutdown cryptocurrency operations

China’s Inner Mongolia region has announced plans to ban new cryptocurrency mining projects and shutdown existing activity to reduce the energy-consuming operation. Mining bitcoins consumes about 128.84 terrawatt-hour per year of energy — more than the energy consumed by countries such as Ukraine and Argentina.

Due to cheap energy resources, Inner Mongolia — located in northern China — accounts for around 8 percent of all bitcoin that’s mined globally. In comparison, the US mines around 7.2 percent bitcoins worldwide.

Bitcoin is not issued by a single entity such as a central bank, but is based on a decentralised network. Hence, transactions involving the cryptocurrency are recorded on a blockchain, which need verification by miners often.

Such verifications are done on purpose-built computers, where complex mathematical puzzles are solved, which allow bitcoin transactions to take place. However, as these computers are high-powered, they consume enormous amounts of energy.

According to a CNBC report, in 2019, Inner Mongolia failed to meet the government’s assessment targets on energy use. Hence, authorities from the region laid out plans to reduce consumption of energy. These plans entail shutting down existing cryptocurrency mining projects by April 2021 and not approving any new ones.

Over time, the Chinese government backed the development of blockchain technology, the underlying technology behind bitcoin. However, it has looked to crack down on cryptocurrencies, including bitcoin. In 2017, Beijing banned initial coin offerings, which were meant to issue digital tokens and raise money. The government also cracked down on businesses involved in cryptocurrency operations, such as exchanges, according to the CNBC report.

The country is also striving to become more environment-friendly. Last year, President Xi Jinping said that the country was targeting peak carbon dioxide emissions by 2030 and carbon neutrality by 2060.