Trade War With the US May Force Beijing to Reconsider Its Cryptocurrency Policy

According to a recent report from the Cambridge Centre for Alternative Finance (CCAF), the United States has solidified its leadership in global Bitcoin mining, controlling 75.4% of the world’s hashrate. This radical shift occurred after China, which previously dominated the sector with up to 75% of global capacity, imposed a ban on cryptocurrency activities in 2021. Against the backdrop of growing trade tensions between the US and China, as well as increasing tariff pressure from the Trump administration, experts are asking: could the PRC reconsider its hard-line position on Bitcoin mining to avoid losing influence in the rapidly developing digital asset sector?

Leadership Change in Bitcoin Mining: From China to the US

The United States has firmly established itself as the world’s largest Bitcoin mining hub. According to data from the Cambridge Centre for Alternative Finance, the US now accounts for 75.4% of all registered network hashrate. This development confirms a significant shift in the balance of power in the cryptocurrency industry.

Historically, China had been a leader in Bitcoin mining since 2017, leveraging its extensive infrastructure and low electricity costs. At the peak of its dominance, the country provided more than 75% of the global hashrate. However, subsequent restrictions radically changed the situation.

In 2019, China’s National Development and Reform Commission (NDRC) signaled its intention to prohibit cryptocurrency mining by releasing a draft law categorizing it as an “undesirable industry.” Two years later, at least four Chinese provinces began shutting down mining operations amid concerns over excessive energy consumption.

By the end of 2021, the government declared all crypto-related transactions illegal, further solidifying the ban and prohibiting overseas exchanges from serving Chinese citizens. This tough stance led to the “great miner migration”—a mass relocation of mining capacity from China to other jurisdictions, primarily the US.

“The sharp shift in Bitcoin mining leadership reflects not only regulatory changes but also geopolitical competition in the technology sphere,” notes Nic Puckrin, co-founder of The Coin Bureau. “The US is actively pursuing technological dominance, and cryptocurrencies have become another battlefield in this struggle.”

Mining in China: Official Ban vs. Reality

Despite China’s official stance toward cryptocurrencies, mining activity has not completely ceased in the region. In July 2024, Bitcoin environmental impact analyst Daniel Batten reported that the hashrate within China currently accounts for approximately 15% of the global total.

“Despite the official ban, the infrastructure is already in place: from offshore mining to cross-border trading hubs. With more global momentum behind crypto adoption and the US taking the lead, China may find itself incentivized to lean in more strategically, even if unofficially,” Puckrin told BeInCrypto.

China also has a geographical advantage over the United States, especially regarding technological advancements. Crypto mining, especially for proof-of-work cryptocurrencies like Bitcoin, depends on Application-Specific Integrated Circuit (ASIC) equipment to handle the necessary complex calculations for validation and mining.

China’s position as a top exporter of crypto mining hardware, particularly to the US, gives it a potential advantage should it decide to revive its mining sector. The unfolding tariff dispute between the two nations adds a layer of uncertainty to the long-term cost efficiency of US mining operations.

Puckrin believes that the combination of trade friction and the US’s invigorated push for crypto dominance might be sufficient to make China reconsider its position.

“It’s unlikely China will make a public U-turn on its crypto mining and trading ban anytime soon. However, with US-based miners accounting for higher and higher proportions of Bitcoin’s hashrate, China is bound to be paying attention and may well be quietly reassessing its stance,” Puckrin stated.

China’s Strategic Interests and Potential Policy Changes

Even though China opposes the widespread use of cryptocurrencies domestically, it may still see value in digital assets to counterbalance the US dollar’s global currency dominance.

Several countries worldwide have either adopted or are considering central bank digital currencies (CBDCs) to strengthen their domestic currencies. China is at the forefront of these developments.

“Despite the ban on Bitcoin mining, China has actively participated in the digital asset space, through initiatives like CDBC research and the digital yuan, or e-CNY,” Wanchain CEO Temujin Louie told BeInCrypto.

In fact, China’s efforts to create a digital yuan are partly driven by its desire to de-dollarize its economy and lessen its dependence on the US dollar.

Louie also suggested that whatever move China makes, it won’t solely base its decision on what the US does or does not do.

“As always, with China, a nuanced approach is best. Any shifts in policy will not be due to US tariffs. Rather, China’s decisions will be informed by global market trends and China’s own domestic strategy,” Louie added.

That said, China’s decisions about digital currency will, in turn, affect how its position on crypto continues to develop.

“Weakening USD dominance, whether exacerbated or caused by President Trump’s approach to tariffs, may embolden China to be more aggressive in [its] efforts to internationalise the yuan, including the digital yuan, or e-CNY. Any change to China’s broader strategy will be reflected in [its] stance towards crypto,” he concluded.

China’s activity in other areas of international trade already proves how nuanced its policy changes tend to be.

Contradictions in Chinese Crypto Policy as a Sign of Possible Changes

Aside from its appreciation of digital currencies like the e-CNY, China’s stance on crypto has already proven somewhat contradictory. These discrepancies may fuel the belief that the country might just be willing to revert—or at least soften—its total ban on mining.

A month ago, investment firm VanEck confirmed that China and Russia—two countries particularly burdened by US sanctions—are reportedly settling some of their energy trades using Bitcoin.

“With the US dollar increasingly being used as a political lever—particularly in tariffed economies—other nations are actively exploring alternatives. Indeed, many countries around the world, including China and Russia, are already using Bitcoin as an alternative for trading in commodities and energy, for example. This trend is only going to accelerate as digital assets become a more prominent part of the global economy,” Puckrin told BeInCrypto.

According to Puckrin’s analysis of these indicators, China’s “shadow crypto economy” is projected to expand this year, which could result in a reassertion of its power. This resurgence would be primarily in response to de-dollarization efforts, rather than a reaction to US dominance in mining.

“We’ll likely see this activity ramping up in the near future, especially as more countries use crypto to bypass dollar-dominated systems,” he concluded.

Despite official rhetoric, China’s actual actions may prove to be much more pragmatic. In the context of deteriorating trade relations with the US and increasing tariff pressure, the PRC may be forced to reconsider its attitude toward cryptocurrencies. If this happens, the global Bitcoin mining market could face a new wave of competition, which will inevitably affect both cryptocurrency prices and the global balance of power in the digital economy of the future.