According to a study by Cambridge University’s Center for Alternative Finance, China is the world’s second-largest hub for mining Bitcoin, despite the country banning the practice last year.
The United States is number one, with 37.84% of Bitcoin mining operations. China is second at 21.11%. The rest of the top five are Kazakhstan (13.22%), Canada (6.48%), and Russia (4.66%).
In September of 2021, the Chinese Communist Party issued a comprehensive ban that includes all forms of cryptocurrency mining and transactions. It followed an earlier ban from the previous May that prevents Chinese banks from providing crypto services.
After China enacted the ban, the number of mining transactions in the country sharply declined.
The strategy was temporarily successful as many miners moved their operations to neighboring countries Kazakhstan and Russia. This could help explain why those nations are now also in the top five.
However, one year later, the number increased 25% over the levels experienced in the days before the ban.
According to the Cambridge report, “it is probable that a non-trivial share of Chinese miners quickly adapted to the new circumstances and continued operating covertly while hiding their tracks using foreign proxy services to deflect attention and scrutiny.”
Part of the reason for the resurgence is that the very aim of cryptocurrency is enhanced privacy and anonymity.
The rise of DeFi, short for Decentralized Finance, is at the heart of those goals and helps these Chinese traders circumvent the ban, TheStreet reports.
DeFi allows two crypto users to trade directly without using a bank or other platform. Direct wallet-to-wallet transactions are extremely difficult to track.
In an interview with the Financial Times last year, a Chinese investor with a foreign bank account explained that he would continue to invest in the alternate currencies.
“I still regularly trade crypto,” he said. “How can authorities stop me when the industry has developed to evade centralized control?”
Cambridge Bitcoin Electricity Consumption Index project lead Alexander Neumiller told Cointelegraph, “Our data empirically confirms the claims of industry insiders that Bitcoin mining is still ongoing within the country. Although mining in China is far from its former heights, the country still seems to host about one-fifth of the total hash rate.”
According to Cointelegraph, the report found that approximately 9% of Bitcoin mining takes place at unverified locations worldwide.
The report also shows the price of cryptocurrencies, especially luna and Bitcoin, has fallen significantly over the past week.
Bitcoin now trades around $29,000 per coin, less than half of the all-time high of over $70,000, and the luna token is now worthless after investors fled en masse.