29.11.2021

Chinese authorities to forcibly stop supplying electricity to local cryptocurrency miners

The local government of Yingjiang County, Yunnan Province in China has issued a stern warning to hydroelectric power plants to ban cooperation with Bitcoin miners.

By the end of today, they must “cross out” all mining companies from the list of recipients of electricity. Recall that this is part of the PRC’s open campaign against cryptocurrency mining, which began in the spring, during which the digital asset market showed a serious drop.

Let’s start with an explanation. The Chinese government’s fight against cryptocurrency miners began in the spring of 2021. It was then that officials from different provinces began to issue decrees banning the extraction of digital assets on their territory. Because of this, many owners of computing equipment like ASIC miners left the country. The most popular destinations for them are the USA, Russia, Kazakhstan and Canada.

According to experts, such an initiative did not arise by chance. Allegedly, in this way, the authorities want to prepare the ground for the popularization of the digital yuan – an updated version of the country’s national currency.

It will be centralized, that is, fully controlled by the country’s main bank. In such circumstances, decentralized alternatives like Bitcoin can negatively affect the popularity of the digital yuan. And in this regard, officials could decide to spoil the reputation of full-fledged cryptocurrencies and make it clear to their citizens about the possible negative consequences of communication with them.

And although the main phase of the fight against miners fell on May – just before the grandiose collapse of the market – it does not end there.

How China Fights Bitcoin Mining

According to Cointelegraph, after the aforementioned deadline, hydropower plants that have not yet met the requirements will be “forcibly disconnected” from supplies to all mining centers in the county’s jurisdiction. In addition, hydroelectric power plants must report to the National Development and Reform Commission of China (NDRC) on interruptions in the supply of electricity to miners.

Using this information, the NDRC will help county law enforcement with a plan to implement the order to ensure that all illegal mining companies are cut off completely.

This means that law enforcement agencies will control the implementation of the instructions. Given such a tough approach, it can be assumed that miners in the mentioned province will indeed lose access to electricity – if they have not already done so.

chart cryptocurrency mining Bitcoin

Dynamics of Bitcoin hashrate change over the last 180 days

According to a local government report, the Yunnan Provincial Energy Bureau previously stated that bitcoin mining centers rely heavily on “unauthorized private access to electricity and government tax evasion on the transfer and distribution of resources. It also includes additional violations related to making a profit. “

We checked the actual data: the hashrate of Bitcoin – that is, the total amount of computing power of the network – today is 145 exaches per second. The local bottom of the indicator was recorded on June 28, 2021 at the level of 69 exahashes. Accordingly, the indicator has more than doubled since then.

bitcoin chart rate

Bitcoin network hashrate chart

Meanwhile, the opposite news comes from Iran: they decided to lift the ban on mining. Recall that in May, the local government issued a decree on the fight against miners, as their high electricity consumption threatened a complete collapse of the country’s energy infrastructure.

The resumption of miners’ work starts in September of this year , that is, a week later. However, mining the crypt will still require a license issued by the Iranian Ministry of Commerce.

As you can see, China is not going to take a step back in the toughness of its regulation of the crypto market. Due to the great pressure, many miners were forced to leave the PRC, which is perceived as a positive factor for the industry in the long term. This will make Bitcoin mining more decentralized around the world.

We believe that the Chinese government’s activity is beneficial to Bitcoin and the cryptocurrency industry in general. In fact, now the niche of digital assets is much less dependent on the decisions of officials than it was at the beginning of the year. In addition, the role of the country itself has also significantly decreased due to the relocation of miners. Accordingly, the Bitcoin network has become more decentralized in terms of cryptocurrency mining – and this is definitely a plus.

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