China is turning off the power to Bitcoin miners in Sichuan Province
The Chinese authorities on Sunday withdrew access to the power grid to crypto miners based in Sichuan province. Around 90 percent of the country’s mining capacities are now under pressure.
The miners in the Sichuan province in the southwest of the People’s Republic of China did not expect this. Because of the large quantities of hydroelectric power available there, they had felt relatively safe, at least not to be among those who would soon be turned off.
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A short warning period leaves miners no time for maneuvers
It turned out differently. Like the news agency Reuters Confirmed after personal inspection, the Development and Reform Commission of Sichuan Province and the Sichuan Energy Office issued a joint notice on Friday calling for the closure of 26 mining projects by Sunday – i.e. within two days.
In addition, the local authorities are requested to search for further miners or miner pools beyond the 26 named projects and to close them immediately. Likewise, no permits may be granted for new mining projects. Power supplies to the miners should be stopped immediately, according to the order.
The authorities had already cracked down on in the provinces of Inner Mongolia and Xinjiang. Up until now it had been assumed that the closings were driven by the use of electricity from coal-fired power plants – and therefore for environmental reasons.
Sichuan was the second largest mining province
That turns out to be a mistake. Apparently, China wants to show that it will uncompromisingly enforce the tightened course against the country’s crypto industry. Cryptomining is big business in China. Around 65 percent of global Bitcoin production comes from there.
According to surveys by Cambridge University, Sichuan has so far been China’s second largest bitcoin mining province after Xinjiang. The status was underpinned by the fact that some miners use the rainy summer there to benefit from the almost abundant hydropower resources.
China’s Reasons: Protecting Citizens from Risks, CO2 Reduction, and the E-Yuan
The Chinese government justifies its actions with the fact that cryptocurrencies offer too high an investment risk for citizens, which is why they must be protected. Experts see two other reasons as decisive for the actions of President Xi Jinping’s government.
On the one hand, China has committed itself to reducing the country’s carbon dioxide emissions by 65 percent by 2030 at the latest. Bitcoin mining is seen as a problem in reducing CO2 around the world. According to the latest estimates, the Bitcoin industry uses around 111 terawatt hours annually – more than the Netherlands.
On the other hand, China is accelerating the introduction of its own digital currency, the e-yuan. It has a number of clear advantages for the government when it comes to controlling its own people. A largely unregulated digital currency like Bitcoin is diametrically opposed to these plans.
Miners have to change location
The big mining pools now have no choice but to change countries. Francis Suarez, the crypto-friendly mayor of the city of Miami in the US state of Florida, has already been promoting it. He would like to welcome the pools that are migrating from China in his city and advertise cheap and “clean” nuclear power.
Argentina is also considered a potential location for crypto miners. Electricity is subsidized there. Last but not least, El Salvador should offer itself. After all, the country has granted Bitcoin legal tender status.
