Saturday, August 13, 2022

Regional Chinese Bitcoin Mines Shut Down, Large Operators Unaffected

Regional Chinese Bitcoin Mines Shut Down, Large Operators Unaffected

Reports from Chinese sources claim several bitcoin mining operations have been shut down or relocated in the country’s southwest. However there’s no indication any big-name miners are affected.

Also read: In the Next Financial Crisis, What Assets Should You Hold?

The English edition of People’s Daily reported the affected mines were in Mabian Yi Autonomous County, Sichuan province. It said the The Bajiaoxi Mining Factory located in Bajiaoxi Hydropower Station is one of the affected operations.

Localized Affair Only

Bitsonline’s sources in China said the shutdowns are a localized affair only, and may mainly involve mines controlled by a single operator. There’s no significant concern, or indication of any effort to close large mines in other parts of the country.

Details are scant regarding the exact reason for the shutdowns in Sichuan. It highlights the usually opaque nature of dealings between Chinese businesses and local authorities.

One source close to the industry said:

“This might be an example of ‘kill the chicken in front of the monkey’ (i.e: to deliver a warning) but in other parts of the country business continues as usual. There’s a lot of politics that could have gone into that decision so its very difficult to analyze from afar. I wouldn’t take this as a canary in the mine situation just yet.”

People’s Daily said the hydropower station could lose one million RMB ($147,000) in charges per month if the mining operations leave. It also quoted a local official as saying the closure of the Bajiaoxi Mining Company “aims at cracking down on illegal cash operations and on controlling systemic risks”.

Exactly what constitutes an “illegal cash operation” or “systemic risks” in regional China is also unclear.

Chinese Authorities and Bitcoin

The Bitcoin world watches closely for any new intervention by Chinese authorities — especially when the price is at record highs. For much of 2017 financial regulators have scrutinized large exchanges. The People’s Bank has imposed new measures such as limiting withdrawals and banning fee-free and margin trading.

Chinese flagYet so far there’s been no interference with China’s primary contribution to Bitcoin — ASIC hardware manufacture and large-scale mining. Companies like Bitmain run massive operations, usually in remote regions.

The Chinese Bitcoin mining industry has grown huge thanks to its proximity to factories capable of mass-producing ASIC chips, and access to cheap electricity. Some have expressed concerns that too much consolidation in one country could be detrimental to Bitcoin, especially one whose government maintains an ambiguous attitude to digital currencies. Reduced network bandwidth due to China’s “great firewall” is another issue.

However there’s not much anyone in Bitcoin can do to prevent such consolidation. Various facets of the decentralized network tend to physically locate in regions where regulatory and logistical conditions are best for each.

Is this anything to be concerned about, or just a local issue? Tell us in the comments.

Images via Pixabay

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