Major Chinese crypto mining companies are moving their operations to North America in anticipation of a renewed crackdown on the industry in China, two industry insiders told TechNode.
One source within a Chinese mining firm told TechNode the company has made arrangements to ship thousands of mining rigs to facilities in Texas in the US and Alberta in Canada. The two regions are top destinations for Chinese mining companies looking to move overseas, the source added.
On May 21, the State Council’s Financial Stability Committee resolved to “crack down on Bitcoin mining and trading” to curb related financial risk at a meeting chaired by Vice Premier Liu He, according to a statement released late the same evening.
This is the first time China’s cabinet has explicitly targeted crypto mining.
China accounts for about 70% of the world’s Bitcoin hashrate, a measure of computing power in the network. The price of Bitcoin plunged 13% to $35,000 in the six hours following the statement.
China’s mining industry has flourished largely due to the wide availability of cheap electricity in regions like Sichuan, Inner Mongolia, and Xinjiang.
Electricity in Texas can cost as little as $0.02 per kilowatt hour (KwH), Ethan Vera, co-founder of a US mining firm told TechNode back in September 2020. The average price for electricity for industrial use in China is $0.084 KwH, but in Sichuan it has been reported to be as low as $0.01 per KwH during the rainy season due to abundant hydropower.
The crypto mining industry has been operating in a legal grey zone, and the central government hasn’t made previously taken decisive moves to embrace or crush it. A year ago, the government of Sichuan appeared to be opening up to crypto mining.
But the 14th Five Year Plan’s sustainability goals spelled trouble for crypto mining in China.
Bitcoin mining has been widely criticized for using up a lot of electricity. By some estimates the network uses up more power than the entirety of Argentina.
Following the plan, Inner Mongolia, whose cheap electricity comes primarily from coal plants, proposed a ban on crypto mining citing environmental concerns. Chinese media reported earlier in May that miners in Sichuan have been expecting increased pressure from provincial authorities as they pursue sustainability goals.
However, the recent move came from financial, not environmental, authorities.
The rising popularity of infamously volatile cryptocurrency marketshas brought negative attention to digital currencies in the last few months. On May 15, state-owned news agency Xinhua published an op-ed criticizing the bull run and calling for more regulation.
Last week, crypto markets crashed briefly three financial industry associations issued a statement calling attention to a 2017 ban disallowing banks and payment institutions from providing crypto services.
READ MORE: Bitcoin crashes on minor news from China
Correction: A previous version of this article misstated the date of the State Council meeting.