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Chinese Bitcoin miners now control a record proportion of the network’s hashrate, according to new research. An estimated 65% of BTC mining now happens in China.

CoinShares, a digital asset investment fund, noted this high since the firm started monitoring the network in late 2017.

Research jointly published in October 2018 out of Princeton and Florida International University estimated that 74% of Bitcoin hashpower is managed by Chinese mining pools⁠, a service that allows miners to pool their resources to reduce the randomness in Bitcoin block reward payouts. However, these figures are a poor gauge of mining centralization because miners from any geographic location can participate in these pools.

Mining is centralized in China because most Bitcoin hardware is manufactured in the country ⁠— with juggernauts like Bitmain, Canaan, and MicroBT dominating the landscape. Chinese customers tend to get preferential pricing and avoid the friction of tariffs and shipping, according to sources familiar with the industry.

Meanwhile, cheap hydro-power makes Sichuan one of the best places in the world to deploy mining hardware. An estimated 54% of the global mining share happens out of this region of China alone.

“The centralization of hashrate threatens the ultimate promise of cryptocurrency networks: that no one party or group controls the ledger or flow of transactions,” said mining expert Kristy-Leigh Minehan to Crypto Briefing. “Any number of natural disasters or state-level threats could introduce network turmoil, whether through increased block times, transaction costs, or transaction censorship at the state-level.”

These figures run contrary to the narrative that the U.S. is on the rise as a mining hub that could challenge China. In October, Bitmain launched a 50 megawatt facility in Texas. Just last month, Northern Bitcoin AG and Whinstone U.S. Inc. merged to open a 100-acre Bitcoin facility in the same state.

Yet, the trade war between the United States and China jeopardizes the American mining industry. Growing tariffs on hardware will further harm margins.

Whether mining centralization will actually impact the trajectory of Bitcoin, however, is still hotly debated.