China signals a crackdown on bitcoin mining and trading as crypto markets slump

China's State Council Financial Stability and Development Committee said late last week that authorities would crack down on bitcoin mining and trading behaviour. It is the first time that mining has been singled out at such a senior level.

China is home to a large share of the world's bitcoin mining capacity, concentrated in provinces with cheap electricity from coal and hydropower. Local authorities in some regions had already begun reviewing mining operations over energy use and emissions targets.

The statement came during a turbulent period for crypto markets. Bitcoin fell sharply last week, well below its April peak, and many other tokens dropped even more. Concerns about energy consumption and a warning from Chinese industry associations about crypto payments had already weighed on sentiment.

Industry observers are considering possible outcomes:

• Miners relocating to other countries, such as the US or Kazakhstan
• A temporary fall in the network's total computing power
• Tighter restrictions on over-the-counter trading within China

For the network itself, the process of adjusting mining difficulty is designed to cope with miners leaving. The bigger question is geopolitical. A shift of mining away from China would change where bitcoin's infrastructure is located and could make it a more prominent issue for regulators in other countries.