Source: website of the Central Commission for Discipline Inspection and the State Supervision Commission
Author: Chai Yaxin, website of the Central Commission for Discipline Inspection and the State Supervision Commission
Recently, the Discipline Inspection Commission of Wuyi County, Zhejiang Province established a special supervision group to go deep into relevant functional departments and organs and units to carry out special inspection on the use of public resources to participate in virtual currency "mining" and trading through remote monitoring and technical verification. The picture shows the special inspection team using the big data intelligent security analysis platform to understand the relevant situation in the county big data center. Ji wenshe
Virtual currency "mining" activities have been officially listed as eliminated industries. The website of the national development and Reform Commission recently announced that the decision of the national development and Reform Commission on Revising the Guiding Catalogue for industrial structure adjustment (2019 version) has been deliberated and adopted. Add item 7 to "I. backward production technology and equipment" (XVIII) others "in the elimination category of" I. backward production technology and equipment "(2019 version) in the Guiding Catalogue for industrial structure adjustment, which reads" virtual currency 'mining "activities".
Since last year, China's virtual currency regulatory policy has continued to increase, clearing and returning "mining" activities and banning relevant business activities. The national development and Reform Commission and other 11 departments issued the notice on regulating the "mining" activities of virtual currency (hereinafter referred to as the "notice"), requiring to strengthen the supervision of the whole industrial chain upstream and downstream of the "mining" activities of virtual currency, prohibit the addition of "mining" projects of virtual currency, and accelerate the orderly exit of stock projects. Ten departments such as the people's Bank of China have also made it clear that virtual currency does not have the same legal status as legal currency, and relevant business activities belong to illegal financial activities.
What does it mean that "mining" is listed as an eliminated industry? Under the background of promoting the optimization of industrial structure and striving to achieve the goal of carbon peak and carbon neutralization as scheduled, what is the practical significance of regulating the "mining" activity of virtual currency? The reporter interviewed Deng Jianpeng, Professor of the Law School of the Central University of Finance and economics and director of the Research Center for the rule of law in financial science and technology, and Guo Yungao, Secretary General of the special committee for energy storage equipment technology of China Electric Power Technology Market Association.
Attracted by the wealth effect, "mining" is chased by capital. Some enterprises layout the "mining" business of virtual currency under the banner of developing high and new technologies such as blockchain
Reporter: what is virtual currency "mining"? What is its background?
Deng Jianpeng: in short, the "mining" activity of virtual currency refers to the process of calculating and producing virtual currency through a special "mining machine". The virtual currency represented by bitcoin is a decentralized blockchain system, which requires network nodes to operate and maintain, package and link the transaction information at each specific time, and obtain the virtual currency issued by the system as a reward.
The virtual currency system uses people's self-interest (obtaining virtual currency as economic incentive) to achieve altruism (operation and maintenance system and improving system security). The individuals or institutions running these network nodes are commonly known as "miners" in the industry, and these computing nodes are "mining machines". "Miners" compete for the right to record transaction information on the chain by purchasing special computer equipment and broadcast it to the whole blockchain system, commonly known as "mining".
Reporter: for some time, the "mining" industry has been hot. What are the driving factors?
Deng Jianpeng: since 2019, the prices of some virtual currencies such as bitcoin have soared, and "mining" has become a profitable and even profiteering industry. Attracted by the wealth effect, the "mining" industry is chased by some capital. Some enterprises have arranged the "mining" business of virtual currency under the banner of developing high and new technologies such as blockchain. In order to promote investment promotion, some local governments have also given these "mining" enterprises preferential policies in terms of finance, taxation and electricity price.
Since the second half of 2020, the price of virtual money market represented by bitcoin has risen rapidly due to the effect of halving production. At the same time, blockchain decentralized Finance (known as "defi" in the industry) launched various "liquidity mining" that claimed to have high returns; Some investment institutions in Europe and the United States have heavy positions in mainstream virtual currencies because of concerns about the devaluation of the US dollar caused by the US Federal Reserve's issuance of additional US dollars due to the epidemic; Individual well-known overseas people "shout orders" for specific virtual currencies. These factors jointly promote the further sharp rise of the price of mainstream virtual currencies in the first half of 2021. This also caused many domestic "retail investors" to rush into the market, with a high concentration of financial risks.
The blind and disorderly development of virtual currency has a serious adverse impact on promoting high-quality economic and social development and energy conservation and emission reduction
Reporter: what adverse effects will mining have? What are the main problems?
Deng Jianpeng: the "mining" represented by bitcoin needs huge electric energy, which belongs to a high energy consuming industry. In order to improve the computing power and increase the probability of competing for the bookkeeping right of bitcoin blocks, thousands of "mining machines" have gathered together to form a super large-scale "mining pool" in recent years. "Mining machines" consume huge electric energy, and the "mining pools" that rely heavily on thermal power generation cause huge carbon emissions and air pollution, which brings pressure on carbon emission reduction, which is contrary to China's national policy of carbon peaking and carbon neutralization.
The abnormal development of the "mining" industry and the enhancement of the computing power of the bitcoin system have also led many domestic retail investors to join the army of "speculation", and the possibility of the spread of financial risks has been accumulating and amplified. The frequent position explosion risk in the virtual currency trading market will also affect the traditional financial market, impact the stability of China's financial market, and then affect the national financial security.
For the risks shown by the virtual currency "mining" industry, the relevant regulatory authorities have previously issued some warnings and requirements. In January 2018, the office of the leading group for the special rectification of Internet financial risks issued a document requiring all localities to guide enterprises within their jurisdiction to withdraw from the "mining" business in an orderly manner. On May 21 last year, the financial stability and Development Commission of the State Council held its 51st meeting and once again made it clear that we should resolutely prevent and control financial risks and crack down on bitcoin "mining" and trading. However, attracted by the rapid rise in bitcoin prices and the introduction of such projects by some local governments for the purpose of increasing employment, virtual currency "mining" has been existing in the market.
Guo Yungao: virtual currency "mining" is a high energy consuming industry, wasting power resources and increasing the total energy consumption of the whole society, resulting in an unreasonable increase in carbon emissions, which runs counter to the goal of carbon peak and carbon neutralization. "Mining" is not in line with the direction of China's industrial development. The output value is almost worthless, and the financial risks in the links of product exchange and transaction are also great. In a sense, it is equivalent to walking on the edge of law and crime.
In general, the risks derived from the production and trading of virtual currency are becoming more and more prominent. Its existence and development are not conducive to social and economic development. Its disorderly and blind expansion has a serious adverse impact on promoting the synergy of energy conservation, pollution reduction and carbon reduction and high-quality development.
Reporter: since the end of last year, the shortage of power supply in some places has aroused concern. What is the energy and power consumption of bitcoin mining?
Guo Yungao: virtual currency "mining" consumes a lot of energy. According to the research of alternative finance research center of Cambridge University, as of May 10, 2021, the annual power consumption of global bitcoin "mining" is about 149.37 billion kwh, which has exceeded the annual power consumption of Malaysia, Ukraine, Sweden and other countries, and is close to Vietnam, which ranks 25th in power consumption. In January last year, the Iranian government accused bitcoin of "mining" behavior, which led to the interruption of power in the country. This is also the main reason why China's "mining" activities are mostly concentrated in Xinjiang, Inner Mongolia, Sichuan, Yunnan, Guizhou and other regions with relatively cheap electricity prices. The huge energy consumption of "mining" also exacerbated the shortage of power supply in some parts of China last year and expanded the scope of local power restriction.
Last April, scholars from the Chinese Academy of Sciences and Tsinghua University published the policy assessment of carbon emissions and sustainability of China's bitcoin blockchain operation. The paper points out that China's "miners" account for more than 75% of the computing power of bitcoin network. Without policy intervention, the annual energy consumption of China's bitcoin blockchain is expected to reach a peak of 29659 TWH in 2024, generating 130.5 million metric tons of carbon emissions, accounting for about 5.41% of China's carbon emissions from power generation. This scale exceeds the total annual greenhouse gas emissions of the Czech Republic and Qatar.
In the stage of high-quality development, under the background of striving to achieve the goal of carbon peak in 2030 and carbon neutralization in 2060, the "mining" industry of virtual currency has no room for survival and development.
Regulating the "mining" activities of virtual currency is of great significance to promote the optimization of industrial structure, promote energy conservation and emission reduction, and achieve the goal of carbon peak and carbon neutralization on schedule
Reporter: what is the practical significance of China's increasing the regulation of "mining" activities of virtual currency and the continuous upgrading of supervision? What does it mean that "mining" is officially included in the eliminated industry?
Deng Jianpeng: from the perspective of promoting the optimization of China's industrial structure, promoting energy conservation and emission reduction, and achieving the goal of carbon peak and carbon neutralization as scheduled, it is of great practical significance to strengthen the regulation of the "mining" activity of virtual currency.
The notice requires multi department linkage and full chain governance, which helps to promote the rectification work in an all-round way. Of course, this rectification is not to deny the blockchain technology related to virtual currency. The notice specifically stipulates that it is necessary to distinguish between "mining" and blockchain, big data, cloud computing and other industries. It can be predicted that the implementation of the notice will help encourage capital to better serve the real economy, prevent more private capital and even listed companies from following the trend of "mining", and prevent the further expansion of financial risks caused by personal "speculation".
The "mining" activity of virtual currency has been officially included in the eliminated industries, which means that China will further strictly implement energy conservation and emission reduction policies and reduce carbon emissions. On the one hand, it is beneficial to reduce speculation, on the other hand, it is also beneficial to reduce the risk of "cutting leeks" by investors without financial risk-taking ability, so as to maintain financial market and social stability.
Guo Yungao: virtual currency "mining" is officially listed as an eliminated industry, which will release a large number of power resources occupied by ineffective and harmful production capacity, enable efficient and beneficial production capacity to obtain relatively sufficient power guarantee, help reduce the degree of power shortage, narrow the scope of power restriction, and effectively reduce greenhouse gas emissions caused by ineffective energy demand. It is also conducive to promoting the development of new industries such as energy storage, supporting the construction of new power systems, serving the large-scale grid connection of renewable energy power generation such as wind power and optoelectronics, and realizing the large-scale substitution of low-carbon renewable energy for fossil energy. It is of great significance to promote the optimization of China's industrial structure, promote energy conservation and emission reduction, and achieve the goals of carbon peak and carbon neutralization on schedule.
Clarify the "clarity" and "turbidity" in the field of blockchain, strengthen the guidance and standardization of blockchain technology, and actively promote the integrated development of blockchain and economy and society
Reporter: what problems should we pay attention to in rectifying the chaos between virtual currency "mining" and virtual currency transactions? What is the focus of work?
Deng Jianpeng: I think there are two key points at present. One is to check the use of resources or other convenient conditions by state-owned units to directly or indirectly participate in "mining"; Second, virtual currency has become a payment tool for some money laundering and illegal economic activities. We should severely crack down on illegal and criminal acts such as money laundering, terrorist financing and fund-raising fraud through virtual currency transactions.
The long-term mechanism to regulate the chaos of virtual currency transactions should be the key consideration direction of policy-making in the future. There are two issues worthy of attention: first, clarify the "clarity" and "turbidity" in the blockchain field, and crack down on violations in strict accordance with the law; Second, in the face of the rapid development of cutting-edge technology and blockchain industry, the supervision mode should be forward-looking, predict the new form of virtual currency chaos in advance, and then study and deploy effective supervision means.
In general, promoting high-quality development is the theme of economic and social development during the 14th Five Year Plan period. For local governments, in the process of attracting investment, we should carefully identify the business characteristics of various enterprises, and comprehensively consider their contribution to the national economy, their role in industrial development and scientific and technological progress, and their impact on natural resources and social environment. For enterprises, in the investment layout, we should also consider whether this business can really promote the innovation of relevant industries, so as to jointly promote the high-quality development of economy and society.
Reporter: not long ago, 17 departments and units such as the central network information office issued a public announcement on the selected list of national blockchain innovation and application pilot. It is mentioned that "speculation, mining and illegal fund-raising in the name of blockchain innovation are strictly prohibited". How to understand the relationship between virtual currency and the underlying technology of blockchain? While promoting digital technology innovation such as big data and blockchain, how to prevent improper use of relevant technologies, so as to promote development and regulatory norms?
Deng Jianpeng: blockchain is a new technology supported by distributed database storage, point-to-point transmission network and asymmetric encryption algorithm. The issuance and trading of virtual currency rely on the underlying technology of blockchain.
Blockchains are roughly divided into two types: one is a blockchain that requires no permission and can be accessed by any user, also known as public chain, such as bitcoin, Ethereum, etc. Second, blockchains that require approval and permission from specific network nodes to enter and access, also known as alliance chains, such as ant chain, JD blockchain, etc. The former needs an economic incentive model to stimulate the operation and maintenance of blockchain system by unspecified "miners" in the world, so it needs to "issue coins", such as obtaining bitcoin rewards through "mining"; The latter can obtain economic benefits through the joint operation and maintenance of several specific network nodes (alliances), and does not need additional economic incentive model to "issue money".
At present, the national industrial policy and financial supervision policy mainly promote the development of "coin free blockchain", that is, alliance chain, which is of positive significance to prevent financial and speculation risks. However, the alliance chain mainly uses the distributed ledger technology of blockchain, which is relatively mature. The research and development of blockchain global cutting-edge technology is mainly focused on the public chain, especially the "blockchain + finance" application. How to prevent its risks and encourage the research and development of cutting-edge technology is a key issue we need to consider.
In the various sub industries involved in the blockchain, the chaos of virtual currency transactions is easy to infringe on the rights and interests of investors, and may even cause financial risks in extreme cases. However, some other blockchain segments may have positive value for the improvement of social welfare. For example, blockchain judicial deposit has low-cost and high-efficiency value for Party evidence collection and court identification evidence. The blockchain based judicial deposit system balance chain has been applied by Beijing Internet court.
At present, the application of blockchain technology has been extended to digital finance, Internet of things, intelligent manufacturing, supply chain management, digital asset trading and other fields. Many countries around the world are accelerating the development of blockchain technology. Blockchain is also listed as a key industry of digital economy in the 14th five year plan, and puts forward clear requirements for improving the level of supervision.
We should carefully divide the "positive and negative" in the field of blockchain, accelerate the innovation and development of blockchain technology and industry, actively promote the integrated development of blockchain and economy and society, strengthen the guidance and standardization of blockchain technology, and implement the "governance of the network according to law" into blockchain management.