The ongoing United States-China trade war is in its fourth year. Former U.S. President Donald Trump saw different results from what he initially expected: America has taken a hit from higher tariffs and sanctions against Chinese companies and hasn’t benefited from it nearly to the same extent. It has cost the country up to 245,000 jobs. The U.S. Chamber of Commerce calculated that the situation puts the exports of each state at risk. For example, the damage to Florida’s exports alone has already reached $1.9 billion.
At the same time, China was taking a smarter approach: It not only imposed reciprocal sanctions and exported its products through intermediary countries (Vietnam, Taiwan and Mexico), but also made the U.S. pay for unsecured and poorly regulated assets — cryptocurrency.
The United States annually inject billions of dollars into the Chinese economy without even suspecting it. The reason is that the majority of Bitcoin (BTC), which is exchanged mainly for U.S. dollars worldwide, is mined in China. It hosts 65% of all mining farms.
To earn Bitcoin rewards, powerful computers solve complex math problems 24/7. Part of the newly mined coins goes directly to crypto exchanges, while the rest can be kept in the miners’ crypto wallets, but is eventually sold to dollars. On average, 900 BTC are mined every day, and the total daily revenue is about $31 million (as of the end of June). That means that in just a year, the miners have earned over $10 billion.
Taking into account China’s share of mining farms, the local miners have earned about $7 billion since last summer. If both the price of Bitcoin and its popularity keep increasing, the revenue will double or even triple each year. In one way or another, the money will circulate throughout the country’s economy: It will be spent, saved or invested.
Under the Party’s control
The Chinese government is well aware of the volume and significance of U.S. dollar investments through cryptocurrencies. Despite the heavily increasing regulation, the authorities are obviously not going to ban Bitcoin.
China restricted crypto transactions for banks and payment companies back in 2013. In 2017, the authorities also shut down local crypto exchanges and blocked access to foreign platforms. That said, locals could legally own cryptocurrency all this time. What we see now is essentially a reminder of the previous restrictions imposed on financial institutions instead of the introduction of new ones. On one hand, the Chinese authorities want to prevent the “transmission of individual risks to the social field,” and on the other hand, they leave the door wide open for foreign investors.
At the same time, the Chinese authorities have begun to restrict mining, which concerns many people on the market. The official reasons are excessive energy consumption and carbon dioxide emissions that prevent the country from achieving carbon neutrality by 2060. But the real situation is a bit different from official statements.
First, the Chinese miners already source cheaper hydroelectricity, which is highly developed in southern provinces, and only switch to fossil-based fuel during the dry winter season when they migrate to the north.
Secondly, the authorities have fully banned new mining projects and the existing ones in three regions: Qinghai, Inner Mongolia and Xinjiang. Other provinces that are rich in hydropower resources, like Yunnan or Sichuan, are in no hurry to impose a total ban. While Yunnan was planning to shut down only illegal BTC mining farms “with a campaign against misuse of electricity,” later in June it was reported that all mining farms in Yunnan Province were shutted down.
Chinese authorities seem to be putting things in order rather than…
Read More: cointelegraph.com