Chinese official punished for supporting cryptocurrency mining companies is expelled from Communist Party

Xiao Yi, a top official in Jiangxi province, was found to have illegally supported enterprises for the purpose of crypto mining
Beijing has driven out most of China’s cryptocurrency mining activities this year in a crackdown that kicked off over the summer

Digital currencies

Josh Ye

Published: 9:30pm, 14 Nov 2021

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A top provincial official in China has been removed from his post and the Communist Party after an investigation found that he abused his power in supporting cryptocurrency mining.

The Central Commission for Discipline Inspection and the National Supervisory Commission found that Xiao Yi, a former vice-chairman of the Jiangxi Provincial Committee of the Chinese People’s Political Consultative Conference, violated the country’s industrial policies, according to a statement posted to the Party’s official website on Saturday.

Xiao’s punishment comes months after Beijing initiated a crackdown on the country’s crypto mining activities, forcing many related businesses to close or offshore their operations. Xiao is now the eighth provincial-level official to be placed under investigation this year amid President Xi Jinping’s intensifying anti-corruption campaign. He is also the most senior Chinese official to be punished for supporting cryptocurrency mining, sending a strong signal to local cadres about Beijing’s stance on the issue.

China drives another nail into cryptocurrency mining’s coffin

“[Xiao] violated the new development concept, and abused his power to introduce and support enterprises to engage in virtual currency ‘mining’ activities that do not meet the requirements of national industrial policy,” the government statement said, without disclosing details of Xiao’s infraction.

The investigation also found Xiao guilty of accepting bribes and attending banquets that may have compromised the fulfilment of his duties. In addition, Xiao traded power for money and sex, the investigation concluded, and exploited his position to favour those close to him when promoting personnel and project contracting in exchange for a large amount of property.

Since June, Chinese authorities have sought to completely eliminate power-hungry cryptocurrency mining activities in the country, in part to help its pursuit of carbon neutrality by 2060.

Last month, the National Development and Reform Commission, China’s top economic planner, added the mining of bitcoin and other digital tokens to a list of prohibited industrial activities. In September, the People’s Bank of China announced an intensified crackdown on cryptocurrency trading and financing, warning that any foreign exchange providing services to Chinese citizens was engaging in illegal activity.

Beijing has long been wary of cryptocurrency, which the government perceives as a risk to China’s financial system. It has also been stridently pursuing energy-saving and emissions-cutting measures this year.

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Is cryptocurrency too risky for China?

Until the crypto crackdown over the summer, China remained the world’s top location for bitcoin mining, although that share had declined from 65 per cent in April 2020 to about 34 per cent in June, according to data from the Cambridge Bitcoin Electricity Consumption Index. The latest data for July and August shows China at 0 per cent.

Beyond just Xiao, other leaders in Jiangxi province have been targeted by Beijing since the 19th National Congress in 2017, when Xi entered his second term. Li Yihuang, the province’s deputy governor, was placed under investigation in 2018 and Shi Wenqing, a senior legislator, was investigated last year. Both were found guilty of embezzlement and misappropriation of public funds, fired and expelled from the party.

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