Chinese regulators are treating the regulatory problems in virtual currency with the strategy of “tightening inside and loosening”

Since the beginning of the year, a regulatory activity against the Bitcoin mine has been pushed forward many times. This shows that China's regulatory authorities are now treating the regulatory problems in virtual currency with a more “tightening and looser” strategy.

At present, many provinces in China, especially the Sichuan region where Bitcoin mines are concentrated, are already in the inventory, and the inventory work is led by the Leading Working Group of the Internet Financial Risk Special Rehabilitation Office. A bitcoin mine owner in the Sichuan region told the Economic Observer that some of the mines in the area have entered a state of downtime and are awaiting the government's next regulatory policy.

This policy differs in the pace of promotion across the country. Relevant persons from local financial offices in two cities in Shandong and Jiangsu Province told the Economic Observer Online that at present, neither of them has received relevant notices. One of the local financial offices said that the clean-up was mainly aimed at areas where some mines were concentrated in the central and western regions.

A person familiar with the matter told the Economic Observer that the regulation of the Bitcoin mining pool had already entered the regulatory horizon as early as the September 2017 ICO policy. The person also said that the current regulatory layer has adopted a “tightening and loosening” regulatory strategy for Bitcoin. The supervision of the mine is only one part of the entire chain of supervision.

The Economic Observer also learned from three independent sources that there are frozen deposits involving virtual currency investments and virtual currency mining investment banks in Hunan, Heilongjiang, Hebei, and Guangdong provinces. The total amount of frozen knowledge is more than 600 million yuan.

At present, 70% of the world's bitcoin mining pool is concentrated in China. It is expected that the tightening of the bitcoin mine supervision policy will have a huge impact on the bitcoin mining market. On January 12th, ViaBTC, the world's fourth largest bitcoin mining pool, issued an announcement stating that “due to policy reasons, domestic mine resources are very tight, and some bitcoin mines with long-term cooperation with ViaBTC are even facing a crisis of closure. The cloud contract maintenance cost of the pool also suddenly increased suddenly, so the management fee for a mining machine was temporarily adjusted from 6% to 50%.

A bitcoin mine owner told the Economic Observer that the policy is still going on, and the impact is expected to gradually increase in the future. Therefore, some large mines have begun to be deployed overseas. However, the cost of “going out to sea” in small and medium-sized mines is difficult to bear. “Whether it is at the capital level or at the resource level, 'going out to sea' is not an alternative path for us,” the mine owner told the Economic Observer.

The mine ushered in the tide of supervision

At the beginning of 2018, a document led by the Internet Finance Risk Special Rehabilitation Office Leading Group (hereinafter referred to as “Mutual Gold Remediation Office”) was issued to the financial offices of various places. In this document, it is mentioned that it is necessary to actively guide enterprises within the jurisdiction to withdraw from the “mining” business, and require local statistics to engage in “mining” enterprises, including the basic situation of the enterprise, revenue, and enjoyment of preferential conditions. Initially, the regulation of Bitcoin mines in some provinces began to tighten.

Bitcoin “mining” is actually a process of “packaging” bitcoin transactions. A certain amount of bitcoin transactions need to be packaged into a block. After being confirmed, it is linked with the previous block to form a so-called "Blockchain". In this process, the “mine owner” responsible for packaging can obtain the bitcoin reward generated by the system, which is also the process of “issuing” bitcoin.

Due to the existence of rewards, competition for “packaging rights” will be formed. Competition uses a workload proof mechanism, the decisive factor being computing power. In the case of bitcoin mining equipment tending to be standardized, the main channel for increasing the input of computing power is to put in more “mining” machines, so thousands of large mines are constantly appearing. These mines require a lot of electricity, so they are deployed in power-rich areas such as Sichuan, Inner Mongolia, and Yunnan.

A bitcoin mine owner told the Economic Observer that since the price of bitcoin began to climb in 2017, the mine has become a high-profit industry, and a mining machine can generate a net profit of more than 200 yuan a day, so the bitcoin mine The number of venues is starting to increase.

In the process of gradually advancing regulatory policies, some mine owners have already felt "panic." A bitcoin mine owner in the Sichuan region told the Economic Observer that the government has recently learned about the situation. In response to the inspection, some mine owners have shut down their mines.

Electricity "original sin"

Since the difficulty of “mining” of bitcoin will increase with the increase of the total network computing power, this positive correlation will lead to continuous investment in various mines.

The input of computing power means that the power consumption is increasing. In fact, the cost of electricity has become the main cost of the Bitcoin mine. According to data from the industry website Digicocomist, the mining industry has accounted for 0.17% of the total global electricity consumption.

Huge power consumption has become one of the reasons for regulatory attention. In the documents issued by the local financial offices, it is mentioned that some of the so-called mining companies that currently produce “virtual currency” are also contributing to the consumption of large amounts of resources. The "virtual currency" speculation speculation.

The above-mentioned mine owner told the Economic Observer that since mining requires a lot of electricity, obtaining cheaper electricity has become the core of Bitcoin mine operations. In view of this, some mines are located in areas with abundant power resources, and even mines are built near hydropower stations or thermal power stations.

“Some mines have received preferential conditions from local governments when they settled in, which is equivalent to investment projects. They tend to build in the name of big data centers and then enjoy some preferential policies on electricity.” The Economic Observer reported.

According to the information previously interviewed by the Economic Observer, some mines used some “cheap electricity” from abnormal channels in order to save costs. After the electricity is generated, it will be uniformly transported into the national grid, and then distributed by the State Grid. The mine will bypass the national grid and directly negotiate with some hydropower stations and thermal power plants to use electricity at very low prices.

"For example, some mines have 10,000 mining machines, of which 5,000 use the regular national grid price, and the industrial power is about 1 yuan. In addition, 5,000 units use some protocol power, and the price may be only about 3 hairs. The whole cost will be Lower." Earlier, a mine owner told the Economic Observer.

These agreements have allowed some power plants to choose to preferentially supply Bitcoin mines, which has led to the exposure of some residents after the winter.

Chain of custody

In 2018, a number of regulatory news for the bitcoin market continued to spread, and their authenticity was different. These rumors involved bitcoin over-the-counter trading, bitcoin mines and other fields.

A person familiar with the matter told the Economic Observer that the current regulatory layer has adopted a “tightening and loosening” strategy for bitcoin regulation, despite the new wave of currency prices rising after the regulatory policy was launched in September 2017. In the middle, the regulatory layer has not acted at all, but for this market, the regulatory layer has always maintained concern and vigilance.

At the same time as the supervision of the Bitcoin mine, the Economic Observer also learned from many sources that since the beginning of 2018, bitcoin over-the-counter transactions and bitcoin mining machines have appeared in various provinces such as Heilongjiang, Hunan, Hebei and Guangdong. The transaction is related to the bank account being frozen. A person who has just entered the bitcoin investment field bought the bitcoin on the first day and the account was frozen the next day.

At the beginning of December 2017, the National Internet Finance Security Technology Expert Committee released a bitcoin over-the-counter monitoring report, which mentioned that since October, the Bitcoin over-the-counter trading platform has been launched, some of which have passed Through the virtual transfer channel between the C2C over-the-counter transaction and the currency trading fund account, some of these platforms have realized the disguised on-market trading of RMB and Bitcoin to some extent.” According to September 2017, The "Announcement on Preventing the Risk of Subsidy Issuance Financing" promulgated by the central bank and other departments has clearly stated that "any so-called token financing trading platform shall not engage in the exchange business between legal tender and tokens and 'virtual currency'."

The above-mentioned insiders told the Economic Observer that the supervision of the Bitcoin mine is also part of the regulation of Bitcoin.

Huang Zhen, director of the Institute of Financial Law of the Central University of Finance and Economics, told the Economic Observer that the current means of monitoring virtual currency has used a "blocking" approach, but in view of the nature of the virtual currency itself, the "blocking" approach Long-term difficulties have a good effect, so Huang Zhen believes that the next step should be to adopt a "grooming" approach, such as establishing China's own digital currency system.

In July 2017, the Central Bank established the “Digital Money Research Institute” to engage in the technology and application of digital currency. Yao Qian, the director of the institute, mentioned the concept of digital currency on many occasions. He divided the digital currency into “(special) private digital currency” and “legal digital currency” and mentioned that “the digitization of money is actually a very Dynamic, evolving things. Some properties are likely to be clear to us, and some properties are probably not fully understood yet, and they need to be fully developed. This is my problem."

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