China and South Korea Clamp Down On Bitcoin Mining To Curb Speculative Frenzy and Assert Authority

Governments whose policies are predicated on the notion of control were never likely to be long term supporters of a financial asset whose basic premise was to avoid and subvert authority. JL

Emma Dunkley and Song Jung-a report in the Financial Times, Martin Poole reports in RT :

South Korea is home to an “irrationally overheated” cryptocurrency market, in the words of the government. Financial regulators said they were looking into local banks that offered virtual currency accounts to see if they were abiding by anti-money laundering rules and used real names for accounts. China’s internet-finance regulator recommended that local governments squeeze bitcoin miners out of the country through electricity pricing, taxation, property law and environmental regulations. ‘Mining’ enterprises that have consumed huge amounts of resources and stoked speculation.'
Financial Times The clampdown on cryptocurrencies in South Korea gathered pace this week, with a global index provider deciding not to reference locally traded digital currency — pointing to an “extreme price divergence” — and as regulators probed banks offering virtual coin accounts.Coinmarketcap, which ranks cryptocurrencies globally based on market cap and trade volume, on Monday said it had removed South Korean cryptocurrency prices from its site because the huge price discrepancy skewed data. The site calculates cryptocurrency prices based on data from global exchanges.The decision sparked a sell-off in cryptocurrencies as traders closely watch developments in South Korea, a vital source of global demand. The country is home to an “irrationally overheated” cryptocurrency market, in the words of the government. Cryptocurrencies trade at a premium in South Korea because of keen demand and the difficulty of setting up offshore accounts to buy them. Bitcoin is trading at a 70 per cent premium in South Korea over international rates. On Tuesday, bitcoin was down 1.5 per cent at Won23.9m ($22,500) on Bithumb, Seoul’s busiest cryptocurrency exchange, compared with $15,350 on Bitstamp, a leading global digital currency exchange.On Monday, Ripple, a digital currency developed in the US, tumbled as much as 35 per cent, while bitcoin was down as much as 14 per cent, according to Reuters. Ripple said on Twitter that the “recent price fluctuation” was due to Coinmarketcap excluding Korean exchanges from its pricing averages, affecting all listed digital currencies.Tim Swanson, director of research at US-based Post Oak Labs, said Coinmarketcap “poorly communicated” the changes to the market, which prompted “uncertainty, panic and contagion”.He added: “It’s not first time they’ve changed something that has caused controversy”, pointing to a decision to exclude some Chinese exchanges a few years ago. RecommendedWhat happened when I gave bitcoin as presentsLex on cryptocurrencies: debased coinagesAlphaville: The Ripple effectOn Monday, South Korean financial regulators said they were looking into six local banks that offered virtual currency accounts to institutions to see if they were abiding by anti-money laundering rules and used real names for accounts. “Virtual currency is currently unable to function as a means of payment and it is being used for illegal purposes like money laundering, scams and fraudulent investor operations,” said Choi Jong-ku, the country’s top financial regulator.“The side effects have been severe, leading to hacking problems at the institutions that handle cryptocurrency and an unreasonable spike in speculation,” he added.Seoul has announced a string of measures to crack down on cryptocurrency speculation, including a ban on anonymous digital currency accounts and legislation to allow regulators to shut down cryptocurrency exchanges if needed. In December, a local cryptocurrency exchange, Youbit, closed and filed for bankruptcy after being hacked twice. “No one knows what is going on at these places that handle cryptocurrency because there is no direct regulation system in place regarding these institutions,” said Mr Choi.

RT

China’s regulatory clampdown on cryptocurrencies is sparking a mass exodus of bitcoin miners from the country, which has the potential to radically alter both global bitcoin and energy markets.

According to a document leaked online, China’s internet-finance regulator has recommended that local governments squeeze bitcoin miners out of the country through electricity pricing, taxation, property law and environmental regulations.

Until now, Chinese miners have capitalized on cheap, coal-fired electricity in regions such as Xinjiang and Inner Mongolia. The document calls for monthly reports on remaining bitcoin-mining operations in each region.
Currently, there are some so-called ‘mining’ enterprises that produce ‘virtual currencies.’ They have consumed huge amounts of resources and stoked speculation of ‘virtual currencies,’” states the document, which is dated January 2. It is purportedly from the Leading Group of Internet Financial Risks Remediation – the internet-finance regulator in China – and was cited by Quartz.
The news is likely to trigger an immediate dip in bitcoin mining, which could create a shortage that would have a knock-on effect on prices, potentially leading to yet another price spike. The shift to more globally distributed mining operations may also drastically influence peak times for transactions, with a corresponding hike in transaction fees likely until the industry adjusts to the new dynamic.
China was once a driving force behind cryptocurrency mining, and accounted for more than two-thirds of the world’s bitcoin-mining operations until recently. The Chinese government previously banned initial coin offerings and halted trading of virtual currencies on local exchanges for a period in 2017.
Bitmain, which controls China’s two largest bitcoin-mining pools, is setting up headquarters in Singapore, and has launched mining operations in the US and Canada, according to the company’s co-founder Wu Jihan, as quoted by Bloomberg. BTC.Top, the third-biggest player in the Chinese bitcoin-mining scene is reportedly also opening a facility in Canada, while ViaBTC – number four in the rankings – has already started operations in Iceland and the US.
Transactions involving cryptocurrencies will not be significantly affected. However, the exodus of miners to locations as disparate as Iceland and Iran, or Canada and Russia, may potentially challenge the sector, which relies on energy-intensive computer networks to enable buying and selling.
“We chose Canada because of the relatively cheap cost, and the stability of the country and policies,” Jiang Zhuoer, founder of BTC.Top, said in an interview with Bloomberg.