This article is compiled and organized by BlockWeeks
Financial Committee Meeting Names "Cracking Down on Bitcoin Mining and Trading Activities"
At 10 PM on May 21 (Beijing time), China's State Council Financial Stability and Development Committee (FSDC) issued a meeting statement, putting forward multiple requirements for the financial system to implement the "decisions and arrangements of the Party Central Committee and the State Council." Among them, the second part explicitly proposed to "resolutely prevent and control financial risks," and listed "cracking down on Bitcoin mining and trading activities" as one of the specific items.
The original statement reads: We must adhere to bottom-line thinking, strengthen all-round scanning and early warning of financial risks, promote the reform of small and medium-sized financial institutions to reduce risks, focus on reducing credit risks, strengthen the regulation of financial activities of platform enterprises, crack down on Bitcoin mining and trading activities, and resolutely prevent individual risks from spreading to the social sphere. At the same time, we must maintain the stable operation of the stock, bond, and foreign exchange markets, severely crack down on securities violations, and severely punish illegal financial activities; strictly guard against external risk shocks, effectively respond to imported inflation, strengthen expectation management, strengthen market regulation, and make good response plans and policy reserves.
This meeting was chaired by the Vice Premier of the State Council. The FSDC was established in November 2017 and is a high-level institution coordinating financial regulation. Its members include Vice Premier Liu He, People's Bank of China Governor Yi Gang, Deputy Secretary-General of the State Council Ding Xuedong, and heads of regulatory agencies in charge of banking, securities, foreign exchange, economic affairs, and national development. This level and wording are the core reason why the market regards it as a "heavyweight signal."
What Is Different This Time: Targeting Miners, and at a Higher Level
After the news was announced, the crypto market, already in a fragile state after a significant round of correction, added further uncertainty. The reaction of the miner community was particularly direct: initial feedback ranged from "accelerating migration" to "complete surrender," but after a week, some of the panic had subsided.
Compared with the past, this round of announcements has two key differences: first, it is the first time miners and traders have been included together as targets, rather than only targeting trading and fiat channels; second, the issuer is the highest-level government committee, and the weight of the statement is clearly different. A short-term decline in hashrate was originally expected—every year during the wet season, miners migrate seasonally to areas with cheap hydropower resources and humid climates; under the new government restrictions, hashrate will mainly flow to Kazakhstan, Russia, and Pakistan, and North America will also benefit.
The possibility of a comprehensive ban is not high, but restrictive measures and stricter government scrutiny are already close at hand.
Historical Context: Three Rounds of Regulation, Three "New Equilibria"
This is not the first time the Chinese government has imposed restrictions on Bitcoin. In 2013, China's central bank prohibited financial institutions from conducting business related to cryptocurrencies, after which OTC counters became the main fiat entrance for crypto assets. In 2017, ICOs and exchange businesses were restricted: Binance exited China before the ban took effect, while Huobi and OKEx suspended related businesses and set up overseas entities to cope with regulation.
In 2020, executives of Huobi and OKEx were questioned as part of a cleanup campaign against payment companies and their affiliated OTC counters, and the relevant OTC counters were temporarily shut down; OKEx suffered the biggest impact and was once forced to suspend withdrawals.
Each event eventually moved toward normalization: China's crypto ecosystem exists in an unstable equilibrium, but it is still an equilibrium after all. Fiat and crypto asset trading is still prohibited, yet OTC counters continue to serve as entry channels; exchanges usually quote in USDT to avoid direct interaction with the banking system, while providing traffic referral services for OTC counters, thereby maintaining a relatively smooth user experience; some exchanges are still operating and have close relations with the government. China remains the base for most hardware manufacturers and mining pools, and is also the geographic center of the mining industry.
Central and Local: After Inner Mongolia, Other Provinces May Follow
China is not monolithic: the central government, provincial governments, and domestically registered enterprises each operate according to different logics. As early as the first half of 2021, provincial-level restrictions had already been implemented one after another—the Inner Mongolia Autonomous Region, which relies mainly on coal power, recently banned Bitcoin mining as part of a series of restrictions on high-energy-consuming industries. With the central level setting the tone, other provinces are likely to follow.
The implementation of central policy is usually slower: nationwide restrictions on crypto trading and mining are almost certain to come, but the possibility of a complete ban on both is extremely low. In response, miners relying on coal power will be the first to leave, and hashrate will first decline due to seasonal migration, then remain suppressed in the long term due to permanent relocation. Volatility will continue as events unfold. China's crypto ecosystem will survive, but on a smaller scale and under tighter regulation—this is just a new equilibrium point.
Market Reaction: Down 12.5% in the First Hour, Weekend Low Around $31,100
Before the announcement, the market was already trading cautiously due to the deep correction over the past two weeks. News from China further depressed market sentiment: the FSDC statement was released at 10 AM Eastern Time on May 21 (Friday), 10 PM Beijing time, and Bitcoin fell 12.5% within the following hour, with the decline once widening to 20% by 2 PM Eastern Time; it continued to decline throughout the weekend, bottoming around $31,100 by noon Eastern Time on Sunday.
Because the announcement was released late, information from regulators was once scarce, and market participants expected clearer statements in the coming week. Some miners panic-sold Bitcoin while clearing machine inventories; on-chain data corroborates this judgment—outflows from miner wallets rose significantly, indicating that miner selling played a role in this round of volatility.
Where Hashrate Goes and Its Distribution: Looking at Network Structure from the On-Chain Traces of S9
Bitcoin is a permissionless network, and its hashrate distribution is not transparent, but miners have left traceable clues on the blockchain. Through nonce analysis, it is possible to estimate the proportion of hashrate contributed by a certain type of hardware. At present, the most typical application of this technology is the Antminer S9—Bitmain's flagship product two generations ago. At its peak dominance in June 2018, S9 and related hardware accounted for about 75% of the network's hashrate; even two hardware generations later, S9 and related equipment still contribute about 31% of hashrate.
Data derived from nonce analysis has repeatedly corroborated research surveys by CoinShares and the University of Cambridge. In the future, this technology can also be used to identify other types of hardware, including new models from Bitmain and other manufacturers, thereby better assessing network health and decentralization at the hardware level.
Mining Machine Sell-Off and Secondary Market Dislocation
After last week's events, ASIC dealers are withdrawing from China. B.top, a dealer associated with mining pool BTC.top, announced that it would stop serving Chinese customers, and Huobi Pool's mining machine brokerage business made the same decision. A large number of machines are expected to flood into the second-hand market, and Chinese miners' inventory clearing may cause a significant price disconnect between the Chinese and overseas mining machine markets.
Long-Term Impact: A More Decentralized Network, and the 1933 Gold Ban
Bitcoin is resilient and is not at the mercy of regulation by any single country. In the short term, hashrate will decline as miners migrate seasonally, and may remain under pressure due to shutdowns and rebuilding elsewhere. But the spread of mining out of China is beneficial to Bitcoin's resilience: it not only breaks the narrative that "China controls Bitcoin," but also makes hashrate distribution more decentralized, making the network itself more robust.
Governments have long imposed bans on stores of value. In 1933, President Roosevelt signed Executive Order 6102, prohibiting private ownership of gold in the United States; the ban did not last long, nor did private gold ownership end. As of 2021, gold still preserves value. Bitcoin's censorship-resistant and confiscation-resistant properties make it less likely that governments can effectively suppress ownership of this asset globally.
In the long run, this is good for the Bitcoin ecosystem outside China: the network will become more robust and more decentralized after the event; and after Bitcoin survives the restrictions, the narrative of "being controlled by China" will also collapse. The research conclusion can be summarized in one sentence: go long Bitcoin, short the banners.
