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China's bitcoin mining market share rebounds to 3rd

globally,

Hashrate Index shows

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Beijing's softening stance, cheap electricity attract

crypto

miners

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Bitcoin seen as strategic asset amid Sino-US rivalry,

analyst

says

Nov 24 (Reuters) - Bitcoin mining is quietly staging a

comeback in China despite being banned four years ago, as

individual and corporate miners exploit cheap electricity and a

data center boom in some energy-rich provinces, according to

miners and industry data.

China had been the world's biggest crypto mining country

until Beijing banned all cryptocurrency trading and mining in

2021, citing threats to the country's financial stability and

energy conservation.

After having seen its global bitcoin mining market share

slump to zero as a result of the ban, China crept back to third

place with a 14% share at the end of October, according to

Hashrate Index, which tracks bitcoin mining activities.

The resurgence in bitcoin mining, which has also been

corroborated by rig maker Canaan Inc's ( CAN ) fast-rebounding

sales in China, could act as a demand and price support for the

world's largest cryptocurrency.

Wang, a private miner in Xinjiang, said he started mining

late last year in the energy-abundant province.

"A lot of energy cannot be transmitted out of Xinjiang, so

you consume it in the form of crypto mining," Wang said, asking

to be identified by just his last name. "New mining projects are

under construction. What I can say is that people mine where

electricity is cheap."

China's state planning body, the National Development and

Reform Commission, which issued the ban in 2021, and the

Xinjiang government did not reply to faxed Reuters requests for

comment.

MINING RESURGENCE

Beijing's crackdown on the sector in 2021 led to miners

shutting down local operations and  fleeing to overseas markets

such as North America and Central Asia.

The rebound in bitcoin mining coincides with the digital

asset hitting record highs in October on the back of U.S.

President Donald Trump's pro-crypto policies, and growing

distrust toward the dollar, making crypto mining more rewarding.

The cryptocurrency, however, is down roughly a third from

its October peak as global risk appetite wanes.

"Chinese policy flexibility emerges when economic incentives

are strong in specific regions," said Patrick Gruhn, CEO of

Perpetuals.com, a provider of crypto market infrastructure. "The

resurgence of mining activity in China is one of the most

important signals the market has seen in years."

China has not officially relaxed bitcoin mining curbs, but

"even hints of China's policy easing could act as a tailwind for

bitcoin's narrative as a global, state-resilient asset," he

said, pointing to industry data signaling renewed activity.

Bitcoin mining - the energy-intensive process of using

specialised computers to solve complex puzzles to win bitcoins -

is especially active in  power-abundant hinterlands such as

Xinjiang, according to miners and rig makers.

Sichuan-based Duke Huang, who quit bitcoin mining a few

years ago due to the Chinese regulatory ban, said some of his

friends have come back to the business recently. "It's a

sensitive area ... But people who get cheap electricity are

still mining."

Besides higher bitcoin prices, a glut of electricity and

computing power following over-investment in data centers by

some cash-strapped Chinese local governments fuelled the

rebound, said a source at a bitcoin mining rig maker, who did

not want to be identified due to the sensitivity involved.

CRYPTO POLICY 

The trend is also captured by sales data from mining rig

makers. 

Canaan, the world's second-biggest bitcoin mining machine

maker, generated 30.3% of its global revenues in China last

year, compared with 2.8% in 2022 in the aftermath of the

crackdown, according to company filings.

China's contribution to Canaan's sales jumped further to

more than 50% during the second quarter this year, according to

a source with direct knowledge, who declined to be named as he

is not authorised to speak to the media.

Canaan, which did not confirm the second-quarter sales

breakdown, attributed its growing sales in China to this year's

U.S. tariff uncertainty that disrupted U.S. sales, rising

bitcoin prices that make mining more profitable, and a subtle

shift in China's digital asset posture.

In an emailed statement, the Singapore-based company said

its activities remain fully compliant with Chinese regulations

but refused to comment on mining policies in China.

"In China, the R&D, manufacturing, and sale of mining

machines are permitted," Canaan said.

The pickup in bitcoin mining in China comes amid signs that

Beijing has softened its attitude toward digital coins. These

were once seen as a challenge to China's fiat currencies and

abetting capital flight.

Hong Kong's stablecoin bill, for example, took effect in

August, enabling the Chinese city to compete with the U.S. in

fostering a regulated market for fiat-currency-backed

cryptocurrencies.

China was also considering allowing the use of yuan-backed

stablecoins to boost the wider adoption of its currency globally

and catch up with a U.S. push on stablecoins, Reuters reported

in August, citing sources familiar with the matter.

"Bitcoin mining is still officially banned in China.

However, there continues to be significant capacity operating,"

said Julio Moreno, head of research at CryptoQuant, a blockchain

data & analytics firm. 

 CryptoQuant estimated that 15%-20% of global bitcoin mining

capacity currently operates in China.

Liu Honglin, founder of Man Kun Law Firm, said it is hard to

wipe out a profitable business.

"I personally think government policies against mining will

be gradually loosened, because you simply cannot stop such

activities completely."

(Reporting by Reuters staff; Editing by Muralikumar

Anantharaman)