Subsidies must also be “specific.” If a subsidy is widely available, it is presumed not to distort the allocation of resources. But if a government subsidy targets particular companies, sectors of the economy, regions or exports, that subsidy runs afoul of the rules.
China’s hydropower glut almost certainly didn’t originate to bolster a bitcoin mining industry that wasn’t conceivable when the dams were built. But Chinese power subsidizes mining all the same, and it doesn’t just cause economic dislocation. It undercuts Bitcoin’s security. A blockchain system maintained by entities within a single government’s jurisdiction is at greater risk of political manipulation and censorship.
The SCM delineates two types of subsidies: prohibited and actionable. Subsidies designed to directly affect trade and thus adversely affect other WTO members are prohibited. Actionable subsidies are those that may be shown to cause adverse effects to other WTO members. When goods are at issue, subsidies can be challenged either through multilateral dispute settlement, or through countervailing action. Subsidies for services are subject to “consultations,” according to WTO rules. The Trade in Services Agreement now being hammered out in Geneva might be expanded to explicitly bar subsidies for digital currency mining, or data processing generally.
As a category buster, bitcoin and other digital currencies can be a poor fit with the traditional rules governing international trade. Anti‐dumping law and the SCM apply only to trade in goods. The new bitcoins created with each block are arguably goods, even if they take digital form. The rest of the mining process is best thought of as providing transaction‐inclusion services for digital currency users. When new bitcoins are no longer being created, mining will be a pure financial and data processing service.
Bitcoin transactions also don’t generally have a “location.” This means inclusion of any particular transaction on the Bitcoin blockchain is not easily proven to be a subsidized service to a consumer outside China, and Bitcoin transactions within China are subsidized to the same degree as transactions outside the country. Countervailing measures such as tariffs would be very hard to administer.
On the other hand, given the global trade and large proportion of Bitcoin transactions among users outside of China, bitcoins as goods and mining as transaction‐inclusion services are clearly being provided to consumers outside China. These are exports, even though the precise place of purchase or location of service may be ambiguous.
Bitcoin’s basis in math makes the case for wrongful subsidies much easier. The power consumption bitcoin mining requires and the hash power available to various mining groups is readily calculable, so it’s quite easy to measure the substantial benefits Chinese bitcoin miners enjoy from being given cheap power.
If China were to build transmission lines that delivered energy more evenly across its economy, the argument that it was subsidizing its bitcoin mining industry would evaporate. The Chinese government may have international trade obligations that require it to withdraw the substantial benefit it now confers on its domestic bitcoin mining industry. Technological measures — such as, restraining blocksize limit, or fine tuning to reduce the amount of bandwidth it takes to propagate new blocks — are not the only tools in the Bitcoin community’s toolbox.