China Takes U-Turn on Cryptocurrency Mining Policies
This week, China’s National Development and Reform Commission (NDRC) quashed plans to abolish cryptocurrency mining throughout the nation. The country currently hosts four of the largest mining pools in the world, and officials had pledged back in April to eliminate virtual currency mining.
China Hosts the Four Largest Mining Pools On Earth
Collectively, BTC.com, Antpool, Poolin, and F2Pool have had command of over 60% of the world’s bitcoin mining hash rate in the last week alone, according to Coin Dance’s recent market statistics.
However, in their quest to embrace blockchain technology, which was recently endorsed by President Xi Jinping, the Chinese have seen a considerable rise in USD/BTC. Following the announcement that mining would no longer be outlawed, little has changed on the global Bitcoin markets.
Global Leaders in Bitcoin Technology
It appears the Chinese government has their sights set on being the global leaders in blockchain tech, recently announcing that the countries rulers will “take the leading position in the emerging field of blockchain.”.
The country is also planning to launch its very own national cryptocurrency, following Ecuador’s release of its own digital currency back in 2015.
Here at Monfex, we believe this will be the first of many actions from the Chinese government as they publicly foster the adoption of digital currencies and blockchain technologies.
Low Rates, Big Profits
Cryptocurrency mining has been a profitable industry for China, with low electricity rates allowing professional crypto miners to live and work at low cost. Canaan Creative, which is one of the largest Bitcoin mining manufacturers, is set to undergo an IPO of $400 million later in November.
The NDRC is one of the most important economic planning agencies that reside under China’s state council. On Wednesday, they published the completed version of their ‘Industrial Structure Adjustment Guidance Catalog.’ This catalog contains a list of all industries that the government body wants to regulate, encourage, or eliminate from China’s financial sector.
Their finalized plan, which is effective as of Jan. 1, 2020, eliminated “virtual currency mining’ from the category it suggested eliminating back in April.
What is Cryptocurrency Mining?
Cryptomining describes a process in which cryptocurrency transactions are verified and added to the digital ledger inside of the blockchain. Also called altcoin mining, cryptocoin mining, or Bitcoin mining, this verification process has increased in popularity as cryptocurrency has become more accepted across the globe in recent years.
Every time a cryptocurrency transaction occurs, it is the responsibility of a cryptocurrency miner to authenticate any information and update the blockchain regarding the transaction. During this process, many crypto miners compete with one another to solve complex mathematical problems concerning cryptographic hash functions that are related to the bocks that contain transaction data.
The cryptocurrency miner that manages to solve the problem first is given the ability to authorize a transaction, receiving a small commission as a reward for their service. Specialized computers with cutting-edge hardware are required to succeed in this highly competitive industry. Such machines demand large amounts of power, which China has no shortage of, and can provide at exceptionally low rates.
This video from Business Insider offers some detailed information on how China managed to become a Bitcoin mining paradise.
Is Cryptocurrency Mining Legal?
Many people from across the world use Monfex to trade their cryptocurrency, so let’s have a look at the legalities of cryptocurrency mining in different countries.
Essentially, Bitcoin mining is legal. However, several countries have declared Bitcoin as illegal. In these countries, the mining and possession of this cryptocurrency are considered illegal. That said, this matter is subjective and can vary in different jurisdictions.
Bitcoin is currently illegal in Bolivia, Algeria, Bangladesh, Ecuador, Macedonia, Nepal, and Venezuela.
Then we have some countries with explicit mining stances, countries that encourage this activity!
Indonesia - In which mining is not regulated in any way.
Ukraine - Where mining is legal and seen as a form of entrepreneurship.
Iceland - Where people can legally mine as a business.
Belarus - Where any individual or business has the legal right to mine cryptocurrency.
Slovenia - Where Bitcoin Mining is established, recognized, and taxed.
We also have countries that have placed a partial ban on Bitcoin, such as:
India, Canada, and Thailand - Which all have banking bans, so all crypto businesses are denied banking services within these countries.
Indonesia - Where Bitcoin is illegal as a payment tool.
It’s safe to say that Bitcoin mining is legal in the majority of countries around the world, except for a few. Most of the countries in Africa have failed to comment on the matter, making their stance unclear.
Anyone currently mining in a country where Bitcoin is regulated, using their own electricity and equipment, is legally good to continue their mining.
How Many Bitcoins Can be Mined in a Day?
On average, 144 blocks are mined every day, in each block, there are 12.5 bitcoins exactly. 12.5 x 144 = 1800, so that’s a rough estimate on the number of new bitcoins that are currently mined every day.
Cryptocurrency Mining in the UK
In the United Kingdom, there are currently no specific laws regarding cryptocurrencies, and therefore, nothing outlawing the mining of Bitcoin.
Bitcoin and other cryptocurrencies are not seen as legal tender, and exchanges like Monfex have strict registration requirements. Her Majesties Revenue and Customs released a brief outlining the taxing of cryptocurrencies.
In this brief, the HMRC stated that the taxability of cryptocurrencies in the UK depends on the parties and activities involved.
That said, gains or losses on cryptocurrency trades are subject to capital gains tax throughout Great Britain.
The Future of Cryptocurrency Mining
The future of cryptocurrency mining will depend on the different regulations set by governing bodies across the world.
Regulation leads to taxation in many cases, making the practice less profitable. However, how long can a process that creates financial profit continue to go untaxed and unregulated across most of our planet?
For additional information regarding the future of crypto mining, check out this resource from Techwalls.com.