"Wasteful" electricity use
China is looking for an "orderly exit" from Bitcoin mining according to a document obtained by
Quartz. Officials at China's financial regulator will place new environmental regulations and power use constraints on firms running mining operations. The country reportedly views Bitcoin mining as a "wasteful" use of electricity and will place restrictions on the large mining groups that have moved within its borders.
China has previously been attractive to large-scale mining operations because
of its low electricity costs. This helps the groups to maximise their profit margins as they seek new units of digital currency. The country is also home to hardware factories and chipmaking foundries, cutting the prices of new components necessary for Bitcoin mining farms.
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Over the past year, China's taken a series of steps that have made it less attractive to miners. The country's started to shut down cryptocurrency exchanges and has moved towards banning initial coin offerings (ICOs).
The documents seen by Quartz state that local governments are now being told to increase power prices for companies participating in cryptocurrency mining. Governments may also introduce new environmental regulations to mitigate the pollution impact of mining operations. China currently accounts for two-thirds of the world's power consumed by Bitcoin mining, an operation the country no longer wants association with.
"A financial asset"
Bitcoin has declined by over 8 percent today, heading towards $15,000 from $17,000 over the weekend. The reports from China have been compounded by comments made by Israel's central bank.
Reuters reports that Deputy Governor Nadine Baudot-Trajtenberg told Israel's parliamentary finance committee that Bitcoin is not a currency.
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Some Israeli cryptocurrency bank customers have reported difficulties in using their accounts to purchase Bitcoin. Baudot-Trajtenberg said the bank is unable to help because there are no models for it to base regulation on. No financial regulators have yet issued banking guidelines that relate to digital currencies. In Israel's view, cryptocurrencies must be treated as financial assets until full banking compliance can be ensured.
As governments worldwide take a more negative stance towards cryptocurrencies, coins like Bitcoin are feeling the pressure. Analysis from
Coindesk today revealed an "increased risk" of a bearish breakdown in Bitcoin's value after the weekend news. Several indicators have slipped into bearish territories as mining groups in China wait for the reports to be confirmed. If China pushes for mining groups to disband, the resulting upheaval could create severe turbulence in the market.
