Bitcoin Mining Pools in Sichuan Shut Down, Is This a Bellwether for State Policy?
Update: It’s said this Tuesday that Sichuan Energy Regulatory Office of National Energy Administration says they received many reports involving illegal electricity consumption by bitcoin mining pools and detailed rules would be released when close investigation is done.
While Bitcoin price is rallying, bitcoin mining pools are shutting down in remote mountainous areas in Sichuan, a southwestern province in China which is home to an increasing number of Bitcoin mining companies. Located at the southwestern edge of Sichuan, Mabian Yi Autonomous County nurtures a number of bitcoin mining pools, including Bajiaoxi, a bitcoin mining pool with 6000 mining machines. The machines can obtain 27 bitcoins after working nonstop for 24 hours and theoretically that’s about 48,000 yuan. To save on costs and electricity, Bitcoin mining pools are mostly operated in southwestern areas in summer and northwestern areas in winter where there is abundant thermal power.
“The whole southwestern areas are now in high water period and the price of electricity is really low, which makes it an ideal mining site. I can’t believe they would actually leave at this time of year. There must be some explanation for this,” said an industrial player.
Before one can hear the noise miles away from the mining machines, but now all you can hear is birds chirping.
“They left at 14:00 p.m. on April 24. What a pity!”
Mr.Su, an operator of a local hydropower station revealed that when the mining pool shut down, some officials came here to investigate. Except for Bajiaoxi mining pool, a few number of other mining pools have also shut down. Su is disappointed to see these pools leave.
“Bitcoin workers consume an average of 4.5 million kwh/month and pay us more than 1 million yuan per month and that’s 12 million yuan every year. But now they left.”
Su said after the mining sites shut down, he feels kind of weird to find the place become so quiet. At present, about 70 percent of bitcoins are “made in China” and the closing down has drawn wide attention among industrial players. When reaching out to relative bitcoin workers, they refused to be interviewed, saying they are trying to avoid media attention. Once a mine is closed, they can’t afford the loss.
“As bitcoin price is skyrocketing, we loss hundreds of thousands of RMB to close for just one day. Plus, we need to find another ideal place to operate. That’s just bothersome,”according to an operation manager who is not ready to reveal his name. “Bitcoin mining is a global business, if a mining pool is not allowed to operate here, it only indicates that worldwide hashrate has transferred to somewhere else. But the total number of bitcoin remains the same and bitcoin price will not fluctuate a lot.”
Bitcoin mining is the foundation of the whole bitcoin network and China has more mining pools than other countries. But China lacks specific regulations on the use of bitcoin, so what’s behind the closing down? Is this just a coincidence or a bellwether for state policy? Industrial players claim that like other businesses, bitcoin mining pools should also be regulated. As bitcoin mining is indispensable to electricity, so should regulation on electricity consumption be made? As the discussion goes on, State Grid Sichuan Electric Power Company went to the mining site for investigation. However, officials noted that there are no such illegal activities as stealing electrical power in the operation of Bajiaoxi mining pool.
“We are only in charge of electrical grid, but bitcoin mining pools are using hydroelectricity and that’s actually out of our right to regulate. Frankly, even if we could, we don’t know how to regulate.”
As such, why did mining pools leave if not breaking any laws?
“Bitcoin mining is not the result of government investment, but the spontaneous behavior of mining companies. Authorities have never released any documents to close down bitcoin mining sites.”
Bitcoin workers of Bajiaoxi mentioned that the decision is not all about outside factors. They are now looking for a new place, but refuse to reveal any details. It’s reported that the PBOC will release two methods to regulate bitcoin in June, one is about bitcoin exchanges and the other is about anti-money laundering. Though there are no mentioning about rules on bitcoin mining pools, miners feel that relative rules will be coming soon.