For several weeks now, China has been taking increasingly severe restrictions on bitcoin miners. The latest step is the closure of mines in the Sichuan region, one of the country’s largest cryptocurrency mining hubs.
Chinese miners had sensed in recent months that the climate was becoming tense with the government. The threat is becoming a reality for them, the Financial Times reported on June 21, 2021. The country’s authorities have ordered the closure of bitcoin mines in Sichuan, one of the southern regions of China that is also one of the most active in this field.
The offensive began on Friday, June 18, in the form of a joint notification from the Sichuan Regional Development or Reform Commission and the Sichuan Department of Energy, requiring the closure of 26 local bitcoin mines within 48 hours.
Cutting off electricity supply to bitcoin mines
To achieve their goal, Chinese authorities relied on, among others, the region’s electricity providers. They were ordered to analyze their customers’ consumption and immediately stop supplying electricity to any entity found to be mining Bitcoin.
Sichuan is not the only region in China to be affected: authorities in Xinjiang, Inner Mongolia and Yunnan have also been conducting offensives against bitcoin mining on their soil. In early June, the Weibo (China’s Twitter) accounts of several influential Chinese figures in the crypto sphere had also been closed.
Sichuan used a lot of green electricity
And by mid-May, China had put in place several restrictions around cryptocurrencies, including banning Chinese financial institutions, especially banks and payment companies, from selling cryptocurrency-related services.
In a sign of things to come, China’s state-controlled media had focused their crypto stories on the problems they can cause – scams, use in trafficking, etc. The fact that Sichuan has also ordered the closure of bitcoin mines, however, is one more step in China’s offensive against the cryptocurrency.
China fears cryptocurrency-related speculation
The reason the region is the second largest Bitcoin mining hub in China is because it has plenty of electricity, thanks to its hydroelectric dams. This electricity has the advantage of being cheap (especially during the monsoon season) but also green. One would have thought that Sichuan would be less affected by the restrictions put in place by Beijing – which is very concerned about the impact of bitcoin mining on its carbon footprint.
This decision proves that the Chinese authorities’ dislike of bitcoin is also linked to other factors. In particular, Beijing fears the speculation that such activities can lead to. “Recently, cryptocurrency prices reached highs before collapsing and speculative activities around cryptocurrencies have resumed (…) disrupting the normal functioning of the economy,” the Chinese regulator had thus indicated, relayed by The Independent, last May.
Making space for the e-yuan
China probably also wants to push its project to create an e-yuan, a digital version of its currency, over which it will be able to keep complete control. It has already been testing it for a year in four major cities and plans to officially launch it in early 2022.
Beijing’s restrictions on bitcoin are expected to significantly redraw the geography of mining activity. Currently, about 75 percent of mining is done in China. Local crypto companies, however, are preparing to migrate to other countries, including the United States, which is already the country with the most bitcoin-related profits in 2020.