China's Strict Regulations vs. Czech Republic's Lack of Regulation: Global Perspectives on Cryptocurrency Mining Supervision

With the continuous rise of Bitcoin, the steadily increasing hash rate reflects miners around the world re-entering the mining industry. However, different countries have varying regulatory attitudes towards mining, presenting different challenges for the mining industry.

In June, Iran's decision to cut off power to domestic Bitcoin miners made headlines. The government's regulatory actions serve as a reminder that regulations can still impact the global operation of cryptocurrencies.

The good news is that the Bitcoin mining industry has overcome the challenges faced at the end of 2018. Reports indicate that the Bitcoin hash rate has steadily increased over the past six months, reaching a historical high of 7,450 TH/s on July 1st:

Despite price fluctuations and regulatory pressures in various countries, the rising hash rate signals a revival in the mining ecosystem. With Iran taking further steps to regulate cryptocurrency mining, this article delves into the key countries in the mining industry and their regulatory measures over the past few years.

China

In recent years, China's relationship with cryptocurrencies has been intriguing. The government has taken a tough stance on cryptocurrency trading, banning Bitcoin transactions and initial coin offerings (ICOs) altogether.

Despite regulatory challenges, China remains a major player in the Bitcoin mining industry, with reports suggesting that Chinese mining pools may account for up to 70% of the tokens mined annually worldwide.

China's dominance in mining is largely due to its abundant surplus of electricity. Sichuan province is a prime example, recognized as the hub of China's Bitcoin mining industry. The surplus electricity has even led power suppliers to encourage companies to establish mining operations.

In April this year, Reuters reported that China is considering a ban on mining activities. If implemented, this could be a significant blow to Bitmain, the world's largest ASIC mining machine manufacturer, which still operates its mining business in the country.

Under increasing pressure from the Chinese government, many mining operators are exploring overseas locations with access to green energy. Environmental concerns and insufficient tax revenues are factors indicating China's indifference to the mining industry.

Canada

Canada has positioned itself as a crypto-friendly country, openly offering opportunities for setting up mining operations. Bitcoin has been classified as a commodity, obligating miners to pay taxes based on how they acquire and use cryptocurrencies. If Bitcoin is treated as income, income tax must be paid; if held as an investment asset, value-added tax obligations apply.

Unlike cryptocurrency trading and regulations, the country prioritizes the development of the mining industry. The main catalysts are the collaboration between the power supplier Hydro-Québec and the energy regulatory body Régie de l'énergie.

The supplier is required to allocate 300 megawatts of electricity to the blockchain industry, exceeding the 158 megawatts provided to existing customers at the time. Additionally, mining companies must bid and pass the review process, with key criteria including job creation and capital investment. Taxation in the country targets mining companies rather than individual mining activities.

Czech Republic and Iceland

The Czech Republic is home to one of the world's largest mining pools, Slushpool, accounting for 7.5% of the total hash rate. The country's regulatory stance on cryptocurrencies is relatively lenient, not recognizing Bitcoin as legal tender and classifying cryptocurrencies as intangible assets.

Similarly, due to cold climates and abundant renewable energy sources, Iceland has become a focal point for cryptocurrency mining. It is estimated that the industry's electricity consumption in the country exceeds the total usage of households.

United States

The United States is also a major player in mining and has adopted a pragmatic regulatory approach. The Commodity Futures Trading Commission (CFTC) classified Bitcoin as a commodity in September 2015, with no specific restrictions on mining activities, while individual states have varying regulations on cryptocurrencies.

Plattsburgh in New York may be the only city in the U.S. that prohibits mining. In March last year, the largest mining operation in Plattsburgh consumed 10% of the city's total electricity, leading to complaints from residents about increased electricity bills. The city council implemented an 18-month ban on mining activities.

A report last year highlighted mining costs in different states in the U.S., with Louisiana having the lowest costs, followed by Idaho, Washington, Tennessee, and Arkansas.

Global Phenomenon

Mining has indeed become a global phenomenon. In favorable conditions, the mining industry will continue to thrive. Canada openly welcomes operators to build mining facilities, with a focus on addressing energy issues.

Given the nature of Bitcoin mining, with growing mining pools requiring more electricity and increasing mining difficulty, energy consumption is expected to rise over time. The total energy consumption of cryptocurrency mining has faced severe criticism in the past two years. However, a report in June this year slightly eased environmental concerns, stating that up to 74% of mining activities are powered by renewable energy sources. This controversial topic is expected to persist, much like the debate on whether cryptocurrencies are a bubble.

Further Reading

• Mining and Miners
• The mysterious figure "Satoshi Nakamoto" who changed the world in the center of the financial crisis

Join now to get the most comprehensive information on fintech, blockchain insights, and industry examples!