China is the biggest bitcoin extractor. The government wants to stop that

Bitcoin price plummets.

Now it's China's fault 1:08

(CNN Business) -

China has extended its harsh crackdown on bitcoin use and trading to the industry that oversees the mining of new cryptocurrency tokens.

Beijing's new steps, unveiled late on Friday, rocked crypto markets over the weekend and pressured crypto miners to suspend some business in China, creating uncertainty about a critical step in the necessary process. to put more of these coins into circulation.

Chinese Vice Premier Liu He told a group of finance officials on Friday that the government "will clamp down on bitcoin mining and trading activity" as part of its goal of achieving financial stability.

The government did not elaborate on specific policies targeting mining or trade.

While China has taken steps to restrict the use of cryptocurrencies for years, the focus on 'mining' is new.

The presence of Liu and other high-ranking members of the cabinet at the meeting, along with measures taken early last week to expand the crackdown on cryptocurrencies, indicate that the Chinese government is becoming more aggressive with its approach.

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The major crypto miners took notice

HashCow, which owns the world's largest mining farms, said on Saturday it would stop selling machines to customers in China and reimburse anyone who already paid for a machine but did not receive it.

(However, he added that he would keep the existing cryptocurrency mining machines.)

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"We will actively support all kinds of laws and regulations in the country to avoid regulatory risks," said the Chinese company.

Another Chinese mining company, BIT.TOP, said it would no longer offer mining services for clients in mainland China.

"Next, we will mine mainly in North America," Jiang Zhuoer, CEO of BIT.TOP, wrote on his Weibo account on Saturday.

"Regulatory risk is not worth taking."

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Prices fall

Such decisions could have huge consequences for cryptocurrencies.

For example, the value of bitcoin is determined in part by the finite number (21 million) of coins that can be created.

Not all coins are in circulation, and bitcoin "miners" use computers to solve complex puzzles and create a new "block" in the chain.

The computers necessary for this process are run by companies such as HashCow and BIT.TOP.

China accounts for more than 75% of bitcoin mining worldwide, according to research published by the journal Nature Communications last month.

In his Weibo post, BIT.TOP's Jiang said that Friday's meeting suggests that the government is trying to prevent a massive flow of capital into cryptocurrency mining, but that people should still be able to mine on their own.

He hoped that half of the country's mining machines could be suspended as a result of the latest actions, because the crackdown is focused on large mining farms.

Bitcoin and crypto-related company stocks were shaken after the China move.

Bitcoin prices fell as much as 13% on Sunday.

The coin last traded at around $ 36,000 per coin, well below the peak of $ 64,000 it reached a month ago, according to CoinDesk.

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Shares of Chinese crypto mining company BIT Mining tumbled 23% in New York on Friday.

And Huobi Technology, a crypto exchange, fell 22% on Monday in Hong Kong.

Huobi, which offers hosting for miners and other cryptocurrency-related products, said on Monday that it would suspend mining-related services for new users in mainland China "to be more focused on expanding our presence abroad."

He added that most users would not be affected by the change.

"Huobi always strives to comply with the evolving policies and regulations of each jurisdiction to adhere to risk and preserve the well-being of our users and their assets," the company added.

"China once again showed who the big shot was, signaling a crackdown on crypto miners," Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, wrote in a note on Monday.

Regulatory risk "now represents an existential threat to the virtual currency space," he added.

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Regulation

China has long limited cryptocurrency trading within the country, wary of the financial risks associated with it.

Last week, financial and banking watchdogs said that financial institutions and payment companies should not engage in any cryptocurrency-related transactions, nor should they provide cryptocurrency-related services to their customers.

The new measures are not just about reducing financial risk.

The computers required for bitcoin mining consume a ton of computing power and electricity, raising concerns about cost to the environment.

In China alone, bitcoin is projected to generate more than 130 million metric tons of carbon emissions by 2024, according to the Nature Communications study.

That's more than the total annual carbon emissions output of the Czech Republic and Qatar in 2016.

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Those kinds of results are also disastrous for China's ambitious climate plans.

President Xi Jinping has promised that his country will be carbon neutral by 2060, and the country is already struggling to contain carbon emissions from other industries.

Some authorities in China have cited environmental concerns as a key reason for the action.

Inner Mongolia, for example, announced in February that it would end all crypto mining projects in the region by the end of April to reduce emissions.

The coal-rich province, which is a bitcoin mining hub due to its abundance of cheap energy, has established hotlines to encourage residents to report companies they suspect of being crypto miners.

- Jill Disis, Alexis Benveniste and Anneken Tappe contributed to this report.

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