China plans to limit power use by some bitcoin miners, people familiar with the matter said, a potential challenge to an industry whose energy-intensive computer networks enable transactions in the cryptocurrency.
The People’s Bank of China on Wednesday outlined the plan at a closed-door meeting, according to the people, who asked not to be identified because it was not public. They did not detail how authorities plan to enact the curbs.
Chinese officials are concerned that bitcoin miners have taken advantage of low power prices in some areas and affected normal electricity use in some cases, the people said.
Local officials have been asked to investigate the high consumption associated with the industry, they said.
The curbs will also involve other regulators such as China’s National Development and Reform Commission, which oversees the power supply.
While the proposed restrictions are unlikely to have a noticeable effect on transaction speeds, they highlight global concerns over the growing energy consumption of bitcoin miners.
The industry uses as much electricity as 3.4 million US homes, according to the Digiconomist Bitcoin Energy Consumption Index.
China is home to many of the world’s largest miners, some of whom have set up around hydroelectric facilities in Sichuan and Yunnan provinces.
“This may have contributed to bitcoin coming off its daily highs,” said Craig Erlam, senior market analyst at online trading firm OANDA Corp in London. “Electricity usage certainly appears to be a significant challenge for the cryptocurrency in the years ahead.”
Bitcoin, which surged 15-fold last year, on Wednesday pared gains and traded around US$14,900 yesterday.
Separately, Bank of America Corp’s Merrill Lynch told employees last month not to offer clients Grayscale’s Bitcoin Investment Trust (GBTC), one of the few financial instruments directly holding the digital coin, as the brokerage broadly eschews the virtual currency.
The firm — already known to be refraining from offering bitcoin futures contracts — told financial advisers not to pitch the fund or execute new client requests to buy into it, according to an excerpt of a Dec. 8 internal memo. The bank is willing to maintain existing positions in brokerage accounts, but not in fee-based advisory accounts.
Wall Street firms have broken ranks in recent weeks over whether to facilitate customers’ bets on bitcoin amid widespread concern that it is a bubble or that the cryptocurrency’s price is potentially susceptible to manipulation.
Bank of America is among those brokerages that have held off on offering the futures introduced last month by Cboe Global Markets Inc and CME Group Inc. The bank issued its policy on the trust days before the initial futures contracts began trading on Dec. 10 last year.
“The decision to close GBTC to new purchases is driven by concerns pertaining to suitability and eligibility standards of this product,” executives wrote in the memo.
The bank does not offer retail clients any other bitcoin-linked products, according to a person with knowledge of the matter who asked not to be identified discussing company offerings.
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