For several weeks, China has been taking increasingly severe restrictions on bitcoin miners. Last step to date: the closure of mines in the Sichuan region, one of the largest cryptocurrency mining centers in the country.
Chinese miners had sensed in recent months that the climate was tense with the government. The threat is materializing for them, reports the Financial Times on June 21, 2021. The country’s authorities have ordered the closure of bitcoin mines in Sichuan, one of the southern regions of China which 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 and Reform Commission and the Sichuan Department of Energy, demanding the closure of 26 local bitcoin mines within a deadline. 48 hours.
Cut off electricity at bitcoin mines
To achieve their goal, the Chinese authorities have relied, among others, on the region’s electricity suppliers. The latter have been ordered to analyze the consumption of their customers and immediately stop providing 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 carried out offensives against bitcoin mines on their soil. In early June, the Weibo (Chinese Twitter) accounts of several influential Chinese figures in the crypto sphere were also closed.
Sichuan used a lot of green electricity
And as of mid-May, China had put in place several restrictions around cryptocurrencies, notably prohibiting Chinese financial institutions, including banks and payment companies, from selling cryptocurrency-related services.
Significantly, the state-controlled media in China had focused their crypto stories on the problems they can pose – scams, use in trafficking, etc. The fact that Sichuan has also ordered the closure of bitcoin mines is, however, a further step in China’s offensive against this cryptocurrency.
China fears cryptocurrency speculation
If the region is the second largest bitcoin mining hub in China, it is because it has plenty of electricity, thanks to its hydroelectric dams. This electricity has the advantage of being inexpensive (especially during the monsoon period) but also green. One would therefore have thought that Sichuan would be less severely 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’ disenchantment with bitcoin is also linked to other factors. Beijing is particularly concerned about the speculation that these activities may lead to. ” Recently, cryptocurrency prices peaked before collapsing and speculative activity around cryptocurrencies resumed (…) disrupting the normal functioning of the economy “, Thus indicated the Chinese regulator, relayed by The Independent, last May.
Make way for the e-yuan
China probably also wants to push its plan to create an e-yuan, a digital version of its currency, over which it can maintain complete control. It has 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 dramatically reshape the geography of mining activity. Currently, around 75% of mining takes place 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.