FILE PHOTO: A representation of cryptocurrency Bitcoin is seen in this illustration taken August 6, 2021. REUTERS/Dado Ruvic/Illustration
October 19, 2021
(This Oct 13 story corrects name to Mao Shixing in penultimate paragraph)
HONG KONG (Reuters) – The United States has overtaken China to account for the largest share of the world’s bitcoin mining, data published on Wednesday by Britain’s Cambridge Centre for Alternative Finance showed.
The figures demonstrate the impact of a crackdown on bitcoin trading and mining launched by China’s State Council, or cabinet, in late May, which devastated the industry and caused miners to shut up shop or move overseas.
China’s share of the power of computers connected to the global bitcoin network, known as the “hash rate”, had fallen to zero by July from 44% in May, and as much as 75% in 2019, the data showed.
Miners elsewhere have taken up the slack, with mining rig manufacturers shifting their attention to North America and Central Asia and larger Chinese miners moving as well, though this process is fraught with logistical difficulties.
As a result, the United States now accounts for the largest share of mining, some 35.4% of the global hash rate as of the end of August, followed by Kazakhstan and Russia, the data showed.
Bitcoin is created or “mined” by high-powered computers, usually at data centres in different parts of the world, which compete to solve complex mathematical puzzles in a process that makes intensive use of electricity.
Russia’s low energy costs and cool climate enabled some companies using surplus electricity to benefit from bitcoin’s surging prices earlier this year, but concerns are growing about illegal mining.
In a letter to the government in Moscow in late September, Igor Kobzev, governor of Russia’s Irkutsk region, pointed to “avalanche-like growth” of energy tariffs, blaming underground cryptocurrency mining.
“(The situation) is further worsened by the ban on mining imposed by the Chinese authorities and the relocation of a significant amount of equipment to the Irkutsk region,” Kobzev said in the letter, according to a report by the Vedomosti daily on Wednesday.
Authorities elsewhere are more tolerant or even welcoming of bitcoin mining, while Chinese authorities announced even tougher rules for bitcoin mining and trading last month.
“Our current focus is accelerating the construction of compliant mining farms in North America and Europe,” a representative for mining rig maker Ebang International Holdings told Reuters after the latest crackdown.
But industry players remain bruised.
“As a veteran who witnessed the industry’s birth in China, I feel the situation today is lamentable,” said Mao Shixing, founder of F2Pool, once the world’s biggest bitcoin mining pool, and co-founder of Cobo, a Singapore-headquartered crypto asset manager and custodian.
“China is losing its share of computing power … the industry’s centre of gravity is shifting to the United States,” he said, speaking before the Cambridge data was published.
(Reporting by Alun John in Hong Kong, Samuel Shen in Shanghai, Aakriti Bhalla in Bengaluru, and Alexander Marrow in Moscow; Editing by Jason Neely, Mark Potter and Jan Harvey)