Crypto mining is not dead, it's just hiding in the office buildings of Shanghai.

Mining hasn’t died at all; it has just changed its appearance.

Written by: Liu Honglin

Many people’s impression of cryptocurrency “Mining” is still stuck in the era of Bitcoin, where one would “move according to the resources”—in winter relying on wind power in the northwest, and in summer depending on hydropower in the southwest. Thousands of machines are often crammed into tin houses in the desert, built by rivers in Sichuan, roaring day and night, consuming electricity like a mountain flood.

But the reality is that what we see more in the industry now is a kind of “lightweight Mining”: not relying on hydropower, not going deep into the mountains, but quietly running a few devices in urban office buildings, without the roar of fans or the smell of burnt circuit boards, just silently “calculating” and quietly producing Tokens.

Due to work reasons, Lawyer Honglin often interacts with Web3 project parties, developers, and investors in Shanghai and Shenzhen. Many familiar friends take me to visit their offices, pointing to a bunch of hardware machines to introduce, “This is our cryptocurrency Mining farm.”

Outside the room is China’s most centralized financial center, bustling with activity. Inside the room, machines operate silently, with no audible sounds and no perceptible changes in temperature, supporting decentralized finance and dreams.

This method of “lightweight Mining” is actually a state that has naturally evolved within the industry under high regulatory pressure in recent years. On one hand, large-scale deployment has long been unsustainable due to policy risks; on the other hand, as many new projects have abandoned the Bitcoin-style PoW route in favor of lower power consumption mechanisms like PoS, distributed storage, and edge computing, the physical form of Mining itself has also become “invisible.”

From a compliance perspective, this is actually a typical state of “invisibility”—the equipment is compliant, the network is compliant, and the operating nodes themselves are not illegal, but their revenue model and incentive logic indeed belong to the category of cryptocurrencies. If you say this is not Mining, it seems impossible to completely dismiss it; if you say it is illegal, there is a lack of substantial illegal characteristics. This gives the industry a subtle space for survival: operating continuously in a gray area, neither too big nor too small, neither noisy nor quiet, but indeed still alive.

To truly understand this reality, we must start with China’s regulatory path regarding “Mining.”

In May 2021, the Financial Stability Development Committee of the State Council clearly stated at a meeting: “We must crack down on Bitcoin mining and trading activities.” Subsequently, a systematic “cleaning up mining” campaign was launched nationwide. Traditional “mining areas” such as Xinjiang, Inner Mongolia, and Sichuan were the first to respond, gradually issuing power restriction notices and shutting down mining sites. In September of that year, the National Development and Reform Commission officially included “virtual currency mining activities” in the “Guidance Catalog for Industrial Structure Adjustment” under the “Elimination” category, thereby establishing the policy direction.

The official reason given is that such activities “consume a lot of energy, emit high carbon, and contribute little,” which does not align with the national industrial policy and the “dual carbon” goals. This characterization had some basis in reality at the time. The PoW mechanism dominated by Bitcoin was indeed a representative of high energy consumption and high density, with electricity usage surpassing that of some medium-sized countries, much of which came from “gray” power sources.

However, with the evolution of industry technology, many crypto projects no longer rely on the PoW algorithm, but instead maintain the network through PoS, DPoS, distributed storage, and other methods. The computing resources required in this model are significantly reduced, and the deployment scenarios are gradually shifting from “suburban metal houses” to “urban office buildings.” You could say it is Mining, but it really doesn’t consume much electricity.

Complicating matters further, the rapid increase in AI development and computing power demand has transformed some underlying facilities that originally belonged to the crypto industry into “policy encouragement targets.” Edge computing, distributed storage, and general-purpose GPU nodes—these technologies, which once constituted the infrastructure for blockchain applications, are now being “acquired” by the AI industry. Moreover, at the level of computing power and architecture, the boundaries between the two are inherently unclear—running an AI training model and running an on-chain validation node may utilize the same set of servers, differing only in the software used and the objectives.

This raises a very real issue: the identification logic that regulatory agencies are accustomed to using, such as “Is the power consumption exceeded?”, “Is the equipment special?”, “Is it deployed in a centralized area?”, has almost become ineffective today. You can’t tell which project is engaged in legitimate AI computing business, which project is using a shell to mine Tokens, and which project is doing both. Reality has long since blurred the boundaries of regulation.

So many times, what we see is not “Mining is being revived,” but rather “it never died; it just changed its appearance.” You will see many Web3 projects that superficially promote AI collaboration and edge node scheduling, but when implemented, they are still running the verification logic of a certain chain; there are also projects that, under the guise of data security and encrypted computing, are actually building their own Token issuance mechanisms.

For local governments, this situation is equally tricky. On one hand, there is a clear prohibition from the central government on “Mining,” while on the other hand, there is strong support for areas such as “computing power infrastructure” and “AI large model training.” If a project’s business model straddles both lines, whether to support it, how to regulate it, and whether it constitutes a violation do not have clear answers.

This kind of ambiguous state further leads many projects in reality to “run if they can, hide if they can,” which instead fosters a more concealed, mixed, and flexible “underground Mining ecology.” You can’t check it, you can’t calculate it clearly, the electricity is residential, the place is an office, the accounts are compliant, and the entity has a license, but it is still calculating a Token. At this point, using traditional regulatory logic to handle it is already outdated.

As a legal compliance professional in the Web3.0 industry, Lawyer Honglin’s personal judgment is that among China’s “three bans” on cryptocurrencies (ICO, cryptocurrency exchanges, cryptocurrency mining), if there is indeed room for relaxation in the future, the first to loosen may be “mining.”

It is not because of a shift in national attitude, but because the “new miners” have already deviated from the original definition. It is hard to describe them as “high energy consumption, low contribution” anymore. On the contrary, they may have become the “computing power entrepreneurs” you encourage, holding subsidies from technology parks, participating in AI competitions, and seriously registering companies, paying taxes, and issuing salaries, but the profits generated include not only RMB but also universally convertible Tokens.

Moreover, the integration of AI and Web3 is becoming increasingly tight. Many blockchain teams are actually participating in the pre-training of AI models, data labeling, or algorithm optimization; while many AI companies have also realized that the on-chain incentive mechanism is more efficient in “crowdsourced computing” and “edge participation.” At this point, forcibly separating the relationship between Web3 and computing power will only become more and more unrealistic.

Of course, I am not saying that regulation should be completely relaxed, but rather that we must acknowledge that the shape of this industry has indeed changed, and we can no longer govern the reality of five years later with the standards of three years ago. Especially when it comes to “ambiguous areas” such as computing power infrastructure and AI service capabilities, what we may need to do is not to completely deny everything, but to clarify which behaviors should fall under the category of the data industry, which behaviors belong to financial regulatory objects, and which behaviors can operate compliantly but must be registered and reported through a “positive list + industry classification” approach.

Otherwise, if we forever equate the term “Mining” with illegal and backward, we will indeed miss out on a part of the future.

Mining, at this point, is not just a compliance issue, nor just an energy issue, but a question of “how we understand the evolution of infrastructure.” From Bitcoin’s “computing power for blocks” to the AI era’s “computing power as resources,” what we are essentially seeing is that an increasing number of underlying computing power nodes are becoming the universal interface of the digital society. If the past decade was about “whoever can mine coins makes money,” then the next decade is likely to be “whoever masters flexible computing power holds the initiative in the industry.”

In this era where the global computing power competition is becoming increasingly intense, if we cannot establish a mining and computing power integration mechanism domestically that respects the underlying technological pathways and can be included in regulatory oversight, we are likely to be absent in the next wave of global computing power infrastructure competition.

Rather than blocking it, it’s better to see its true nature clearly; instead of hiding it, it’s better to incorporate it into the open rule system. This way, at least it can reduce the concerns of projects that could operate in the sunlight and lessen the motives for gray operations.

This is indeed a new issue that needs to be discussed.