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Lack of regulations shuts down Bitcoin mines in Sichuan
Editor’s note: A version of this post first appeared on Yicai Global, the English-language financial news service of Shanghai Media Group. Yicai Global is one of just two dedicated Chinese news feeds connected to the Bloomberg terminal.
Bitcoin mines in China’s southwestern province of Sichuan have been unable to capitalize on the soaring value of the cryptocurrency as there is no government regulation over the practice, according to a market insider.
There are a number of bitcoin mines in the province thanks to the vast amount of hydropower, which is cheaper to produce than from other sources. As mining is power-intensive, cheap electricity is a key money saver for miners. Some of the mines have been forced to shut down or relocate, despite the rising value of Bitcoin, China’s National Business Daily reported.
“The southwestern region has abundant hydropower resources,” an insider said, “so electricity costs about half the price during the wet season. It’s hard to imagine why any mine would want to relocate now.”
“The price is so high at the moment,” a bitcoin mine manager, who asked to remain anonymous, said. “Shutting down costs mine owners hundreds of thousands of yuan every day.”
Officials at local government departments all said that there were still no regulations in place for Bitcoin mines.
There is no significant connection between bitcoin mines and the financial risks associated with the market, an insider said, as mining has little to do with actual trading of the digital currency.
“Bitcoin regulation that the central bank conducted mainly focused on financing and leveraging trading among platforms,” said Zhang Jun, a senior analyst at Tai Cloud Research Institute. “Mining online involves routine digital programming. It’s not illegal.”
“Bitcoin mines are not introduced by the government, mining is carried out by companies of their own accord,” a local official said, adding that the government had not ordered any mines to close down. Regulation poses a new challenge, he added, as the central government has yet to introduce any policies, local governments have no legislation to act on.
Bitcoin mining going underground is something nobody wants to see, said Zhang. “It’ll make regulation more difficult and miners’ lives will be affected. Miners actually want regulation, so their rights and obligations are written in black and white and they have no need to hide from regulators.”
The People’s Bank of China, the nation’s central bank, will roll out two sets of measures for bitcoin trading in June to prevent money laundering, state-owned broadcaster CCTV reported previously but made no mention of bitcoin mining.