China was famed for providing the largest hash rates for Bitcoin mining, even providing as much as 60% of global hash rates. Things fell apart in the summer of 2021 after the country launched a massive crackdown but a District court states that mining is not illegal.
Shanghai’s Chongming District People’s Court presided over a case where the defendant was charged with mining cryptocurrencies. According to court documents, the defendant referred to as Zhu used 25 computers to mine Ether illegally by leveraging his position as a company’s network maintenance personnel to pull it off.
The prosecution averred that Zhu installed a graphics card, mining, and remotely controlled software which he used to mine Ether illegally that netted him a profit of around 16,000 yuan. They also submitted before the court that Zhu did not act alone but he had an accomplice that ran the scheme in concert with him.
Presiding Judge Yang Qingtang formed a collegial panel to look into the merits of the case in accordance with the law. In the end, the defendant was slammed with 11 months in prison and a fine of RMB 5,000 but not for the charges of cryptocurrency mining. Rather, he was guilty of the offense of “illegally controlling the computer information system.”
Qingtang extolled the virtues of cryptocurrency mining as an activity that has positive effects of improving the economy of a country. However, the judge added that while it is not illegal, the activity does not conform with the current climate of energy conservation and reduction of carbon emission. He added that the violation of the law of illegally controlling computer systems was the reason behind the conviction.
Last year, the top brass of the Chinese government including ten Ministries and Commissions issued the Notice on Rectifying “Virtual Currency Mining Activities” that highlighted the huge amount of energy used by cryptocurrency mining operations. Their resolution included the fact that it added to the carbon emissions and contributed an insignificant amount to the economy.
“Virtual currency mining features high energy consumption and carbon emissions, and doesn’t play a positive role in industrial development and technological progress,” said Meng Wei, a spokesperson for China’s National Development and Reform Commission. “The blind and disorderly development has a severe adverse impact on promoting high-quality economic and social development, energy conservation, and emission reduction.”’
The fallout of this resolution was grim for mining companies in China as a full-scale government crackdown ensued. Miners fled from the country sending Bitcoin hash rates to new lows. As hashrates fell, Bitcoin and the entire cryptocurrency markets felt the shockwaves as prices tumbled in the wake of the crackdown.