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Breakingviews - Capital Calls: China digs bitcoin hole

Cryptocurrency mining facilities are seen in Pristina, Kosovo June 12, 2018.

HONG KONG (Reuters Breakingviews) - Concise insights on global finance in the Covid-19 era.

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SUPPLY-SIDE CRYPTO-NOMICS. China is gumming up another supply chain. Just weeks after bitcoin nearly hit $60,000, Inner Mongolia has published a proposal to shut down cryptocurrency mining operations and ban new digital coin projects by April. The region’s computers account for 8% of global bitcoin production while China overall is responsible for over 70%.

As provinces respond to President Xi Jinping’s aim of being carbon-neutral by 2060, massive mining operations in Xinjiang and Sichuan might be switched off next. The energy required is staggering; the University of Cambridge estimates that bitcoin alone – and there are thousands of cryptocurrencies worth $1.5 trillion, according to CoinMarketCap – will consume over 128 terawatt hours of electricity per year based on current rates, slightly less than Sweden.

A squeeze would hurt industry suppliers such as Canaan and Nvidia, and moving mining operations en masse will be disruptive. For now, scarcity value could give the volatile virtual commodity an unneeded upward push. (By Pete Sweeney)

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