Written in August 2026 about events in mid-2021. This is a retrospective, not contemporaneous reporting.
What happened
On 21 May 2021 the State Council's Financial Stability and Development Committee published a statement on financial risk that spent one line on Bitcoin: crack down on mining and trading. Provincial orders followed through June, and the mining industry that had been concentrated in Sichuan, Xinjiang and Inner Mongolia was told to stop.
It did. Estimates of China's share of global hashrate before the ban run from half to around two thirds, and most of it went offline inside a month.
On 3 July 2021 the network's difficulty adjusted downward by 27.94 percent, from roughly 19.93 trillion to 14.36 trillion. It remains the largest negative adjustment Bitcoin has ever recorded. It was the third of four consecutive downward moves that together took difficulty down around 45 percent.
What it changed
Nothing about the rules. This is the part worth sitting with.
Bitcoin targets one block every ten minutes on average. It does not achieve this by having anyone in charge of the pace. Every node recalculates a difficulty target every 2,016 blocks, from how long the previous 2,016 actually took. Blocks arriving too slowly means the next target drops; too quickly means it rises.
So when half the hashrate vanished, blocks did slow down, for weeks. The average block interval stretched well past ten minutes, confirmations took longer, and the network kept producing blocks the entire time. Then the retarget arrived and pulled the interval back toward ten minutes at the new, smaller hashrate.
A system with an operator would have needed the operator to decide something. This one needed 2,016 blocks to elapse. The adjustment is not a response to the news, because the code has no concept of news. It is a response to arithmetic on timestamps.
What it did not change
The supply schedule. Difficulty and issuance are separate: the subsidy halves on block height, not on time or hashrate, so a slower chain does not mint more or fewer coins, it just reaches the next halving later in wall-clock terms.
It did not make Bitcoin decentralised either. Concentration in China was a real risk and losing it was a real improvement, but the hashrate that left mostly reassembled in other places, with its own concentrations. Geography changed; the underlying question of who can be pressured did not go away.
And a 51 percent drop in hashrate is a genuine reduction in the cost of attacking the chain during the window it takes to recover. That the network kept working is not the same as nothing having been at stake.
What we know now
Global hashrate recovered to its pre-ban level within about a year and has set records repeatedly since. Mining redistributed largely to the United States, and to Kazakhstan and Russia, with Kazakhstan's share falling again after its own power problems in 2022.
The episode is now the standard reference for the claim that Bitcoin has no off switch, and it earned that. It is worth remembering the less comfortable half: the network was demonstrably slower and cheaper to attack for several weeks, and it survived anyway.