Why is Xinhua News Agency closely monitoring the "crypto circle"?

This article is from Xinhua News Agency.

In just 10 days, six investigative reports were released, covering multiple important links in the virtual currency industry chain, from mining to trading to financing… This series of investigative reports by Xinhua News Agency hits the nail on the head regarding the chaos in the "crypto world," stirring up a storm not only within the "crypto circle" but also exposing various issues existing in the entire virtual currency industry chain.

Why is Xinhua News Agency keeping a close eye on matters in the "crypto circle"?

We cannot let "air coins" harvest hard-earned money.

Collapse, plummet, bloodbath… Since May 19, these "tragic" words have been repeatedly used to describe the market trends of virtual currencies like Bitcoin. Each significant price fluctuation stirs the emotions of "crypto traders" and stimulates the nerves of every onlooker.

Bitcoin plummeted nearly 30% overnight. Journalists contacted acquaintances in the "crypto circle" to understand the situation, and the response was one of despair. Some saw their leveraged accounts of 3 million yuan evaporate in an instant, others lost all recent profits, and some suffered heavy losses due to abnormal trading platform operations…

The image shows a WeChat chat screenshot between a reporter and an investor. On May 19, this investor suffered heavy losses due to a liquidation in virtual currency leveraged trading.

The risk warning brought by the overnight crash is stronger than a million admonitions, yet these painful costs could have been avoided. It is essential to quickly publish reports revealing the investment risks in the crypto circle!

The first article introducing the risks of the crypto circle to the public was successfully broadcast on May 20, immediately attracting widespread market attention. Over the next ten days, virtual currencies experienced wave after wave of "roller coaster" ups and downs, and Xinhua News Agency closely followed the trends, releasing one investigative report after another. Many people began to see through the "tricks" of virtual currency trading speculation:

Those founders focused on raising money through "air coins" often first register a shell company, spend money to hire an outsourcing team to design a "virtual coin"; they hype the project through advertising, seminars, celebrity endorsements, and live streaming; then they lure investors to use overseas platforms to crowdfund for "listing" and recharge for trading; large holders manipulate the price to soar, attracting more funds before selling off, "harvesting" the hard-earned money of investors.

Dogecoin, Catcoin, Pigcoin, Eelcoin…

"Air coins" are like air, invisible and intangible, lacking physical support and application value.

Once the price of such speculative targets collapses and the tide recedes, investors are left with only huge losses and regret.

Moreover, according to the current judicial practices in our country, contracts for virtual currency trading are not protected by law, and the consequences and resulting losses are borne by the relevant parties.

During the interview, a statement from a victim, Ms. Cao, left a deep impression on the reporter. She said, "I know the risks of investing in virtual currencies are high, but at that time, I thought that as long as someone buys in, I can make money by flipping it in between."

Among the investors who fell victim, some were driven by high returns and deceived by sweet talk, but many knew it might be a scam yet still chose to take the risk, hoping they wouldn't be the last one holding the bag. It is under this "gambler" mentality that many investors gradually fell into the traps set by criminals.

(Image source: Xinhua News Agency Audio and Video Department)

Therefore, in the series of reports, the journalist often devoted extensive space to warn about the risks of virtual currency trading speculation, earnestly advising the public to stay away from "crypto trading" and to establish a correct investment philosophy.

It is encouraging to see positive feedback from netizens in the comments after the articles were published. Many people expressed that they have recognized the investment risks and will not rashly venture into unclear and incomprehensible areas.

We cannot let high-energy-consuming "mining farms" occupy precious resources.

Since we need to expose the chaos in the "crypto circle," we must start investigating from the upstream of the industry chain.

Virtual currencies like Bitcoin are not physical; they consist of complex codes generated by computers and need to be obtained through computer calculations based on algorithms, commonly known as "mining."

Virtual currency mining relies on computer calculations, and the "mining machines" used for mining must have extremely strong data processing capabilities, generally with high power consumption.

"Miners" gather many "mining machines" to form "mining farms," mining day and night to extract virtual currencies for profit, resulting in enormous electricity consumption.

On May 26, the exterior of a "mining farm" visited by the reporter. It is called a "data center," but is actually a "mining farm." Photo by Xinhua News Agency reporter Zhang Yunlong.

How much electricity does a "mining farm" consume? It is essential to investigate on-site. However, secretly visiting these "mining farms" hidden in deep mountains and valleys requires courage and determination.

After taking a vehicle from Guzha Town in Kangding City, Sichuan Province, and traveling along a dirt road not even marked on the map, the reporter finally arrived at a "mining farm" by the riverbank.

Inside the simple factory building, rows of large iron racks with high-speed running "mining machines" emitted waves of heat, and the roar of the fans even drowned out the sound of the rushing water from the nearby Dadu River tributary, the Balang River.

Through conversations with several local operation and maintenance personnel at the "mining farm," the reporter learned that this company, under the guise of "water and electricity consumption," was actually engaged in virtual currency mining activities while posing as a "data center." The company has more than a dozen such "mining farms" in the western Sichuan region that directly draw electricity from small hydropower stations.

As the investigation deepened, the electricity consumption of the "mining farms" became increasingly astonishing to the reporter:

Some "mining farms" consume over a million kilowatt-hours of electricity in a single day; a "mining farm" in a certain western province can "consume" 45 million kilowatt-hours in a month; a "mining farm" in a certain southwestern area has an annual electricity consumption equivalent to the total annual electricity consumption of three cities; the global electricity consumption for Bitcoin mining is equivalent to that of some medium-sized countries…

On May 26, at a "mining farm" in a certain western province, the reporter saw that each machine room was filled with "mining machines," with fans roaring and the outer casing covered in dust. Photo by Xinhua News Agency reporter Zhang Yunlong.

Such a large amount of electricity consumption neither supports any real industry nor produces any actual value, nor does it create jobs or tax revenue.

One company I visited, claiming to engage in "data business" but actually mining, had an average monthly electricity consumption of 25 million kilowatt-hours last year, yet paid only 250,000 yuan in taxes for the entire year, with only a few workers visible in the vast factory.

In our country, trading platforms for Bitcoin and other virtual currencies were gradually cleared out in 2018, but at that time, there was no clear regulatory action against mining activities, nor was there encouragement for it.

In the reporter's impression, local governments had different attitudes toward "mining farms" a few years ago. Some were clearly "unwelcome," while others remained watchful, allowing operations as long as the "mining farms" did not engage in illegal financial activities, money laundering, or "steal electricity."

Some "mining farms," under the guise of "water and electricity consumption," engaged in virtual currency mining activities while brazenly entering certain regions' "water and electricity consumption industry demonstration zones," becoming "demonstration enterprises" for water and electricity consumption.

On May 26, the reporter visited a "mining farm" where some equipment "remnants" were carelessly piled in a corner of the hall. Photo by Xinhua News Agency reporter Zhang Yunlong.

With the emergence of numerous virtual currencies, the electricity consumption for mining has also exploded, putting immense pressure on our country's energy supply.

The high-energy-consuming behavior of virtual currency mining has raised significant alarm among local governments. Since the beginning of this year, Inner Mongolia Autonomous Region has implemented multiple policy measures to eliminate virtual currency mining projects, shutting down and withdrawing 35 mining enterprises by the end of April.

This time, both the national and local governments have sent clearer and stronger signals.

On May 21, the 51st meeting of the State Council Financial Stability Development Committee explicitly proposed to crack down on Bitcoin mining and trading activities.

To combat virtual currency mining, it is necessary for local governments to actively issue documents to halt mining activities and cut off new growth; comprehensive measures including electricity prices, land, taxes, and environmental protection must also be introduced to promote the orderly exit of existing enterprises.

We cannot relax the institutional fence.

"Since our country has already cleared out virtual currency trading platforms, why are there still so many people lingering in the 'crypto circle'? It seems that trading cryptocurrencies hasn't been hindered." Netizens often raise similar questions in comments on the articles.

As early as 2013, the People's Bank of China and five other departments issued documents clearly stating that financial institutions and payment institutions must not engage in any business related to Bitcoin. In other words, since then, Bitcoin cannot be exchanged for RMB, nor can it be used for payment and settlement.

So how do the large amounts of virtual currencies mined in domestic "mining farms" get converted into cash and sustain business operations? How do domestic investors recharge and withdraw their virtual currencies on overseas trading platforms?

This indicates that some financial institutions and payment institutions have not strictly implemented the relevant requirements, leaving opportunities for virtual currency trading platforms. During interviews, many experts expressed concern: Will the speculative risks of Bitcoin and other virtual currencies be transmitted to the financial system…

Recently, the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association jointly issued a notice, reiterating:

Financial institutions, payment institutions, and other member units must not use virtual currencies to price products and services, must not underwrite insurance business related to virtual currencies or include virtual currencies within the scope of insurance liability, and must not directly or indirectly provide other services related to virtual currencies to customers. Internet platform enterprises must not provide network operating venues, commercial displays, marketing promotions, or paid traffic services for virtual currency-related business activities.

While it is important for associations to guide member units to strengthen self-discipline, timely action from regulatory authorities is even more direct and effective. Some have suggested that regulatory authorities should increase punitive measures against institutions providing services in violation of regulations to deter others.

In fact, it is not only financial institutions that should not support speculative activities related to virtual currency trading. Currently, the packaging and promotion of investing in virtual currencies as "high returns" and "get rich overnight" can be seen everywhere. Video websites, group chats, and forums feature so-called "influencers" drawing traffic, while "experienced individuals" share "crypto trading" experiences in social media circles, and overseas platform apps can operate smoothly for transactions within the country…

The regulation of speculative activities related to virtual currency trading is not the responsibility of a single department but requires a comprehensive approach. Relevant departments should participate according to their responsibilities and implement functional supervision.

If Bitcoin and other virtual currencies are treated merely as virtual commodities for trading, ordinary people have the freedom to participate in transactions at their own risk.

However, if virtual currencies are packaged as speculative targets promising "high returns," attracting investors to flock to trading platforms, then we must tighten the institutional fence and protect the interests of the public.

The volatility of virtual currencies continues, and no one knows when this "roller coaster" will reach its end. However, through a series of investigative reports, if more and more people can be kept away from the risks of the "crypto circle," timely applying the brakes to prevent further risk transmission, then the original intention of Xinhua News Agency to keep a close eye on the "crypto circle" will have been achieved.