What the Inner Mongolia ban means for crypto miners

power plant

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Cryptocurrency miners are fleeing one of the world’s leading regions for bitcoin production due to a recent government ban. Inner Mongolia – which accounts for around 8% of all bitcoin mining globally – recently announced the ban set to go into effect on May 1 in order to help meet China’s new clean air goals.

In the wake of the news and impending shutdown, mining operations are being forced to relocate and make new plans as to where to host their hardware.

Here is a closer look at the ban, why it is happening, and how miners on the move can still mine profitably going forward.

Inner Mongolia as a center for mining

Inner Mongolia is an autonomous region of northern China. China is the world’s leading producer of bitcoin (and many other forms of crypto), with Inner Mongolia itself making up for around 8% of global bitcoin mining.

Inner Mongolia has a cold, dry climate that makes it a great location for crypto mining. It is also rich in coal, which helps provide a fairly inexpensive source of electricity. But while coal may provide cheap power, coal-burning power plants are also a significant contributor to air pollution. This is one of the leading factors in the impending ban.

Why the ban is happening

The provincial government of Inner Mongolia stated it needs to end crypto mining in the region in order to help achieve the new carbon-reduction goals set by the national government.

Many other regions in China are able to provide clean hydroelectricity to power miners (with some volatility during and after the rainy season), but Inner Mongolia’s crypto farms run on the aforementioned coal-powered electricity, which lends itself to increased pollution.

This issue has been on the Chinese government’s radar for some time now, as Inner Mongolia failed to meet central government assessment targets regarding energy use in 2019. The result is the ban forcing miners to leave before May 1, in addition to preventing any new mining operations from entering the region.

This has caused some concern among miners as to where to move their operations in order to remain profitable.

Miner relocation

The seasonal migration of crypto miners in China is not a new phenomenon, with many doing so in response to electricity price volatility during and after the Chinese rainy season. This new instance, however, appears to be more permanent.

China has expressed serious long-term plans to control energy consumption and to gradually achieve carbon neutrality over the next few decades. In the 2019 United Nations general assembly, President Xi Jinping pledged China would reduce carbon emissions by 2030 and achieve carbon neutrality by 2060. Inner Mongolia will play a significant role in making this happen.

While some miners are moving to other regions in China, many see overseas as a more attractive option due to the hydropower volatility currently at play in China. Electricity is abundant and cheap during the rainy season, but expensive during dry spells. Torrential rains during the rainy season can also lead to flooding that can damage mining farms.

For many miners, North America has emerged as an increasingly appealing location, due to its cost-competitive and stable energy costs, stable regulation, trusted and transparent business practices, and the increased decentralization of crypto in places like the U.S.

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