December 6, 2023

Bitcoin Mining in China is Legal, but it Violates Environmental Rules

A Chinese court ruled that mining of cryptocurrencies is not illegal; however, mining violates the country’s existing environmental standards, according to the judge. The Chinese government’s anti-cryptocurrency stance has resulted in a mass exodus of miners to new jurisdictions.

China has historically had the highest hash rates for Bitcoin mining, accounting for 60% of the total global hashing rate. In 2021, a government crackdown led to a collapse of the mining sector, but a district court determined that the business was lawful.

Mining Not Illegal – The Bushel 

There was a case heard recently at the Chongming District People’s Court in Shanghai concerning allegations of cryptocurrency mining by the defendant. The defendant, identified as Zhu by the court documents, allegedly mined Ether illegally using 25 computers by leveraging his position as a company’s network manager.

The prosecution alleged that Zhu installed mining software, a graphics card, and remotely controlled software for illegally mining Ether, which netted him approximately 16,000 yuan. Also, before the court, Zhu was alleged to have conspired with another individual who conducted the scheme with him. Judge Yang Qingtang appointed four judges to examine the case’s merits following the law.

The defendant was sentenced to 11 months in prison and a fine of RMB 5,000 but not for accusations of mining cryptocurrency. Instead, he had committed a crime of “illegally controlling the computer information system.

In his speech, Qingtang extolled cryptocurrency mining as a positive activity that contributes to the development of the economy of the country. However, the judge added that while the action is not unlawful, it does not conform with the current climate that promotes energy conservation and carbon emission reductions. He explained further that the conviction was due to a violation of the law concerning controlling computer systems illegally.

Chinese Law

China’s top brass, including ten ministries and commissions issued the Notice on Rectifying “Virtual Currency Mining Activities” last year to highlight the tremendous amount of energy utilized by cryptocurrency mining operations by miners in the country. The resolution noted that it contributed insignificantly to the economy and increased carbon emissions.

Meng Wei, a spokesperson for the National Development and Reform Commission, said that the Mining of virtual currencies has high energy consumption and carbon emissions and does not contribute to technological development and industrial development. 

The blind and disorderly development is a considerable obstacle to achieving high-quality economic development, energy conservation, and emissions reduction,” she concluded.

A full-scale government crackdown followed the resolution’s implementation, resulting in terrible consequences for mining companies in China. Bitcoin hash rates have dropped precipitously as miners fled the country. With cash rates falling, Bitcoin and crypto markets experienced price drops in light of this crackdown.

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