Crypto Mining Businesses in Japan and China Close Up Shop

The world of crypto had its fair share of lows in 2018 and, even though it did not seem like it at the time, the effects of the year-long bear market of the last year affected much more than the prices of the digital currencies. Some of the worst-hit sectors were those that had a direct link to crypto, that is, related businesses such as large-scale mining businesses suffered greatly. This was primarily because the crypto market was beginning to become less appealing to some of the largest firms in the world and they began to slowly pull the plug on what were once some of the most lucrative operations in the industry.

China’s Bitmain to Pull the Plug

Crypto mining giant, Bitmain was once considered a titan in the digital currency mining business, not just in China but in the whole world as well. In fact, the company controlled close to 80 percent of all the hardware that was used in the generation of new digital currencies. Well, not anymore. The company is no longer as highly regarded as it was a short while back and there are even reports that it is planning to lay off between 50 and 80 percent of its staff. This is despite the fact Bitmain controls some of the largest mining pools on the planet and is the leading supplier of the mining equipment, both of which gave it significant control over the bitcoin and Bitcoin Cash networks.

Unfortunately, as the prices of the digital currencies continued to dwindle in 2018 and the level of difficulty in minting new digital coins remained high, there was a significant drop in profitability. As a result, a number of companies including Bitmain have chosen to exit the large-scale cryptocurrency mining business which is no longer viable since the cost of hardware and power is much higher than the value of the digital currencies that are mined.

The Situation in Japan

According to Japanese media, GMO, one of the country’s retail giants, is pulling out of the bitcoin mining hardware industry in Japan citing increased pressure on the profitability of the business due to increased hash rates and mining competition. The move, as it turns out, reportedly cost GMO a whopping 25 billion Yen. Despite exiting the crypto mining hardware business, GMO will still continue to mine and also plans to launch a cryptocurrency exchange in the near future.

Japanese e-commerce company DMM is also reportedly leaving the business through the closure of its crypto mining firm in Kanazawa. As expected, the company also cited declining profits as the main reason for the move. The company now intends to focus on its crypto exchange platform that has already achieved full regulatory and license status in Japan.

UK Treasury Committee Says It’s Time to Regulate Bitcoin

Lawmakers in the United Kingdom feel that it’s about time that bitcoin is regulated. They have highlighted the potential risks of trading and spending cryptocurrencies, and believe that the next step is to develop a framework that would protect users.

Protecting Consumers

A committee of MPs have come forward to urge London’s Financial Conduct Authority to supervise “crypto-assets”. They are concerned about the number of risks involved for investors. For example, the price of cryptocurrencies is incredibly volatility and there are few consumer protection protocols in place. There is also the potential for cryptocurrencies to be hacked and there is also the danger of it being used to launder money.

There are major concerns that individuals who choose to invest in cryptocurrencies are putting themselves in danger. While it is becoming more widely used around the world, there is still plenty of work that needs to be done in order to protect investors and ensure that bitcoin and other crypto-assets are safe to trade.

Nicky Morgan, Chair of the Treasury Committee says:

“It’s unsustainable for the government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting. At a minimum, regulation should address consumer protection and anti-money-laundering.”

The Right Decision

There are varying opinions in the debate of cryptocurrency regulation. Some experts state that regulation could help cryptocurrencies grow while other believe that it would stifle their growth. There are many different sides to the debate, and it is time for regulators to weigh the pros and cons of each option.

Some experts argue that cryptocurrencies won’t be able to grow without regulation. This is because many potential investors are wary of putting their money into bitcoin without knowing that they are protected.

There are others, however, that are concerned regulation could stop further development of cryptocurrencies. If regulators try to apply traditional rules to bitcoin, then there is the chance that it may limit the ways in which cryptocurrencies could branch out and innovate.

It will be interesting to see how the UK government plans to go about regulating bitcoin and other cryptocurrencies, if they decide to go that route. There are plenty of opportunities to help protect consumers using regulation but, at the same time, it would have to be done in such a way that cryptocurrencies can continue to grow and develop.

Plenty of work needs to be done before a working regulatory model is introduced. Lawmakers will need the input of developers, investors and bankers in order to create a framework that benefits all parties involved.