US Replaces China As World's Epicenter For Bitcoin Mining

In August 2021, 35.4% of the world's power dedicated to Bitcoin mining came from the United States, according to a study by the Center for Alternative Finance at the University of Cambridge (CCAF). This proportion doubled in just four months, according to activity measured in April of the same year.

This increase in hashrate (a unit of measurement used to assess the power of mining) is not explained by an explosion in activity across the Atlantic. The United States has benefited from the effects of the sharp drop in cryptos in China.

A few months earlier, the country seemed unconquerable. But the government has declared war on the crypto industry. Digital currencies have been subject to increasingly restrictive regulations.

Illegality and clandestine mining

In June, the Chinese government banned mining of cryptocurrencies on its territory. In September, he struck again by decreeing that all financial transactions carried out in digital currencies would henceforth fall under the law . The objective put forward by the Central Bank of the country (PBOC) is the fight against "money laundering, [illegal] fundraising, fraud, and other illegal and criminal activities", all crimes associated with Bitcoin.

According to CCAF data, in June 2021 China held 34.25% of the global hashrate , and the United States 21.8%. The following month, that of China fell to 0. The United States mechanically reached 35.1%.

It is unlikely that mining has completely disappeared in China, despite efforts to eliminate it, Bomberg says . His business would continue in hiding. The CCAF recorded a sharp increase in transactions from Germany and Ireland, while there was "no evidence of large mining operations". By redirecting their IP address through VPNs, minors can make their computers appear to be outside of China.

In one year, $ 50 billion in cryptocurrency leaked from China

Electronic currencies are a means of circumventing the law on the transfer of currencies out of the country.

Officially, confidence in the Chinese economy is unwavering. Except that the rich who live in the country do not seem entirely convinced: to shelter their money or to escape the tax authorities, they and they massively transfer their fortune abroad.

According to a report by the International Institute of Finance, a record 131 billion dollars in foreign exchange thus fled Chinese territory during the first six months of 2019.

By law, Chinese citizens are theoretically allowed to purchase a maximum of $ 50,000 in foreign currency each year. In the past, the wealthiest fringe of the Middle Kingdom have resorted to various devices to get rid of this rule, such as complex international arrangements or real estate purchases - not forgetting, of course, the good old suitcase of tickets.

Crypto-money laundering

Since then, Beijing has toughened its tone, and it is now much less easy to use such maneuvers. Investors therefore had to turn to a new method to discreetly get their capital out of China: cryptocurrencies.

“Over the past twelve months, as the Chinese economy has suffered from the trade war and the devaluation of the yuan, we have seen more than $ 50 billion worth of cryptocurrency go from addresses based in China to addresses abroad, ” reports Chainalysis, an analysis firm specializing in blockchains, quoted by CNBC .

All these crypto-transfers abroad are not aimed at the flight of capital. However, this annual amount is so high that it seems practically a given that a good part of these operations are a form of money laundering and legal circumvention, argues the Chainalysis report.

The influx of transactions can also be explained by the significant mining activity in China, and by the massive transfer of freshly harvested crypto-money.

The report also links the surge in transactions directly to statements by the Chinese government, as President Xi Jinping officially touted blockchain last October and called on his country to invest heavily in the technology.

The collapse of stock prices in the United States and China due to the Covid crisis, high market volatility and the decline of the yuan have not helped. Tether is the favorite of the Chinese against Bitcoin: thanks to its lower fluctuations, it offers a relative haven of stability for capital placed outside the country.