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Bitcoin Mining Pools in Sichuan Shut Down, Is This a Bellwether for State Policy?

bajiaoxi mining pool

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.”

bitcoin miningSu 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.

 

COMMENTS(39)

  • BitcoinAllBot
    4 months ago BitcoinAllBot

    Here is the link to the original comment thread. Or you can comment here to start a discussion. Author: 8btccom

  • educo_
    4 months ago educo_

    Meanwhile, it seems BTCChina and OKCoin have resumed BTC withdrawals.

  • boundinshanghai
    4 months ago boundinshanghai

    To local bank accounts in RMB only, or will they now allow coin transfers to foreign exchanges?

  • hostilewesternforces
    4 months ago hostilewesternforces

    I thought the point of bitcoin was that it’s freely convertible, not tied to a another specific currency.

    /is bitcoin a currency or a commodity head asplode

  • mrfrosty2016
    4 months ago mrfrosty2016

    freely convertible, not tied to a another specific currency.

    With Chinese characteristics.

  • hostilewesternforces
    4 months ago hostilewesternforces

    Topical, maybe.

    https://np.reddit.com/r/Bitcoin/comments/6bvkfm/death_by_regulation_bitcoin_held_hostage_by_china/

    https://bitconnect.co/bitcoin-news/493/death-by-regulation-how-the-pboc-is-moving-bitcoin-out-of-china/

    The PBOC wants this forced upon Bitcoin users, in particular, for many reasons. One, the Chinese government is totalitarian in nature, and they love the control of their people, in a variety of forms. This level of invasiveness wouldn’t fly in the United States, for example, but in China, this may not seem excessive. The Chinese people are used to being controlled, and their government is not out to disappoint them.

    Two, “capital flight” is seen as a major issue within China, as their economy is slowing down into a form of a recession. People of means want to begin moving their finances into more lucrative markets and endeavors, which may also be overseas. Bitcoin is perceived to be a popular means for moving money out of China by regulators, although Bobby Lee of BTCC has publicly disputed this narrative.

    This really will serve as a deterrent, making using Bitcoin so onerous and inconvenient that it will dissuade the masses from using it. Then the national currency comes out behind these oppressive regulations, and Bitcoin loses its allure. There’s more than one way to skin a cat, or ban a Bitcoin, and this is a soft ban, which will serve the same effect. Make Bitcoin useless through regulations that defeat the purpose of using it, as it was originally intended.

    Oh! Like the global Internet!

    I look forward to the inevitable: “China has our own cryptocurrency, do you know it? Much better than Broken Western Bitcoin!”

    Which only works in China. Which is Good Enough for true Chinese patriots.

    Oh, sweet nationalism! Is there anything that you can’t do?

  • educo_
    4 months ago educo_

    Coin transfers are enabled.

    Within the hour, Houbi has followed suit.

    See https://twitter.com/cnLedger

  • MemoryDealers
    4 months ago MemoryDealers

    Looks like FUD

  • arnili
    4 months ago arnili

    China ban Bitcoin?

  • me-i-am
    4 months ago me-i-am

    Sounds a lot like Hong Kong freedom…

  • Bitcoin3000
    4 months ago Bitcoin3000

    Probably something to do with electricity fraud like the last time this type of announcement was made.

  • balthisar
    4 months ago balthisar

    I used BTCC extensively last year to move five years of savings out of China. Did they recently prevent people from moving coins from wallet to wallet? Seriously?

  • Shishioo
    4 months ago Shishioo

    I used BTCC extensively last year to move five years of savings out of China. Did they recently prevent people from moving coins from wallet to wallet? Seriously?

    If you sell your bitcoins on an American exchange, don’t you have to pay capital gains on your savings? Any way around this?

  • balthisar
    4 months ago balthisar

    I can’t see how anyone at all could trust them with their BTC, then. If you can’t move your coins to any wallet — anywhere — this is a potential Vesuvius-sized Mt. Gox waiting to happen.

  • boundinshanghai
    4 months ago boundinshanghai

    I would not doubt it.

  • balthisar
    4 months ago balthisar

    You only have to pay capital gains on the actual capital gains. As I only used BTC as a transfer mechanism, there was no gain, and no tax due. And as an American, that income was already taxed.

    Nothing dodgy, other than avoiding China’s currency export controls.

  • kulio_forever
    4 months ago kulio_forever

    Regulating an industry in such as way as to make the business basically die is a typical tactic, like Uber

  • educo_
    4 months ago educo_

    Well, it seems they didn’t have much choice. PBOC went poking around, and all China-based exchanges removed the functionality simultaneously. But certainly, I wouldn’t want to store coins in any China-based wallets.

  • mrgoodkat1707
    4 months ago mrgoodkat1707

    If your income was taxed i.e. legal, you could have just wired it out. No limit and no stupid BTC transfers necessary. The currency controls don’t apply to money earned legally by foreigners.

  • Zyoman
    4 months ago Zyoman

    There must a [hidden] reason to leave or do you think the whole story is fabricated?

  • kulio_forever
    4 months ago kulio_forever

    Guys i am too old, how does this business work? The comp actually does the work or a person does the work? What can these workers make in a day and what kinds of startup costs are we talking about?

    any help is appreciated, this is a cool futuristic market

  • kulio_forever
    4 months ago kulio_forever

    reality

  • AU_is_better
    4 months ago AU_is_better

    Source?

    edit: just checked my account, you’re right! thanks!

  • 8btccom
    4 months ago 8btccom

    Huobi also resumed btc withdrawl. 50 btcs per day. U need to complete video confirmation first.

  • Doofus
    4 months ago Doofus

    Sichuan, a mountainous areas in China, is home to many btc mining sites.And now it’s in wet season, But mining pools there suddenly shut down, including Bajiaoxi, a mining pool with 6,000 machines that obtain 27 btcs per day. Bitcoin workers are not willing to reveal any details. And local government say they never release any documents asking them to close down. As the bid three resumes btc withdrawl, how come mining pools left for no reason?http://news.8btc.com/bitcoin-mining-pools-in-sichuan-shut-down-is-this-a-bellwether-for-state-policy

  • OROBTC
    4 months ago OROBTC

    …That’s brand new and interesting news to me, what with China being so dominant in Bitcoin mining.Maybe it’s some kind of local issue (I did not read your link), but if it is a “trial balloon” by the Chinese government to maybe shut down or restrict BTC mining or commerce, that is huge news.Please let is know of any other developments.  Great scoop.EDIT: Just saw franky1’s comment, maybe that explains it.

  • Hydrogen
    4 months ago Hydrogen

    The segwit 2MB scaling agreement could have something to do with this.It is possible miners based out of china were funded by central banks & their only motivation was to support bitcoin unlimited in an attempt to centralized bitcoin.Once the segwit agreement was reached, there was no longer a reason for them to mine as their window and opportunity to centralize bitcoin and fork ended.Of course this is all vaporware conspiracy theories. Still, its not easy to explain how miners in china shutdown for no reason.

  • franky1
    4 months ago franky1

    Quote from: Doofus on Today at 02:32:51 AM

    Quote from: franky1 on Today at 02:24:05 AM
    4.5 million kwh/month and pay us more than 1 million yuan per monththats $0.033 per kwh…. not cheap i guess they decided to go up north and stay up north more long term instead of seasonal
    Sichuan is now in wet season and the electricity price will only cost 50% of that of in dry season.

    i added more to my previous post which might add extra depth to the argument against staying in the south..but hey im just googling..

  • dunfida
    4 months ago dunfida

    Quote from: Kakmakr on Today at 06:04:08 AM
    I think they might have some issues with wet coal in the wet season too, because most of these coal are stored in the open and in the dry season the coal is dry and more efficient. Wet coal being less efficient will increase electricity prices in the wet season, so these miners might be going north to operate in an environment where there are no seasonal influences in the electricity prices. It is all about efficiency, because cheaper electricity = more profits. ^smile^
    Its just a common sense to think off on a certain company or group on this way.As long on where the business would be profitable they will surely make changes later on. They shut because they saw that they aren’t making money and would need to move to another place.

  • franky1
    4 months ago franky1

    4.5 million kwh/month and pay us more than 1 million yuan per monththats $0.033 per kwh…. not cheap i guess they decided to go up north and stay up north more long term instead of seasonal
    might also be that exactly a month after them leaving the southern locationsouthern chinese state electric grid raised the price of non-residential electrichttp://www.ebeijing.gov.cn/BeijingInformation/BeijingNewsUpdate/t1094426.htmQuote
    China’s National Development and Reform Commission (NDRC), the top economic planning agency, Thursday announced a rise in the price of electricity for non-residential use by 2.8 fen ($0.4 cents) per kWh on average nationwide, as of Friday.
    Quote
    and for commercial use 79 fen per kWh, according to Beijing Electric Power Corporation.
    .. might help explain it.. coal in the south isnt as cheap as hydro electric in the north
    also mongolia is having big growth and able to offer special discounts,.. as another possible layer as to why they would had north sooner

  • Doofus
    4 months ago Doofus

    Quote from: franky1 on Today at 02:24:05 AM
    4.5 million kwh/month and pay us more than 1 million yuan per monththats $0.033 per kwh…. not cheap i guess they decided to go up north and stay up north more long term instead of seasonal
    Sichuan is now in wet season and the electricity price will only cost 50% of that of in dry season.

  • Kakmakr
    4 months ago Kakmakr

    I think they might have some issues with wet coal in the wet season too, because most of these coal are stored in the open and in the dry season the coal is dry and more efficient. Wet coal being less efficient will increase electricity prices in the wet season, so these miners might be going north to operate in an environment where there are no seasonal influences in the electricity prices. It is all about efficiency, because cheaper electricity = more profits. ^smile^

  • Doofus
    4 months ago Doofus

    Quote from: dunfida on Today at 06:10:40 AM

    Quote from: Kakmakr on Today at 06:04:08 AM
    I think they might have some issues with wet coal in the wet season too, because most of these coal are stored in the open and in the dry season the coal is dry and more efficient. Wet coal being less efficient will increase electricity prices in the wet season, so these miners might be going north to operate in an environment where there are no seasonal influences in the electricity prices. It is all about efficiency, because cheaper electricity = more profits. ^smile^
    Its just a common sense to think off on a certain company or group on this way.As long on where the business would be profitable they will surely make changes later on. They shut because they saw that they aren’t making money and would need to move to another place.
    then how come they refuse to be interviewed and say they expect regulations on mining pools? The timing is just so weird.

  • talkbitcoin
    4 months ago talkbitcoin

    Quote from: Doofus on Today at 08:12:19 AM

    Quote from: dunfida on Today at 06:10:40 AM

    Quote from: Kakmakr on Today at 06:04:08 AM
    I think they might have some issues with wet coal in the wet season too, because most of these coal are stored in the open and in the dry season the coal is dry and more efficient. Wet coal being less efficient will increase electricity prices in the wet season, so these miners might be going north to operate in an environment where there are no seasonal influences in the electricity prices. It is all about efficiency, because cheaper electricity = more profits. ^smile^
    Its just a common sense to think off on a certain company or group on this way.As long on where the business would be profitable they will surely make changes later on. They shut because they saw that they aren’t making money and would need to move to another place.
    then how come they refuse to be interviewed and say they expect regulations on mining pools? The timing is just so weird.

    because it is none of anybody’s business why they stopped, it is their own business that they can start and stop at any time for any reasons. they don’t have to explain to anyone about the “why” of it and you are making a far fetched assumption about regulation on mining and even if it happens, it is just going to force them to pay taxes which they may already be paying anyways!

  • franky1
    4 months ago franky1

    the other thing can befake company never making bitcoin. pretends its moved away to set up elsewhere, while publishing numbers of income vs expense in the hopes of grabbing VC money under the pretence they are already established yet only just setting up in the north

  • Shishioo
    4 months ago Shishioo

    Yeah, I see, I’m guessing you are holding these Bitcoins then and not selling them? Otherwise, I’m not sure how it is in the USA, but in my home country I’ll need to pay 30% tax on the profit I make if I sell Bitcoins. But maybe not in USA? Your taxes are lower overall so wouldn’t surprise me.

  • balthisar
    4 months ago balthisar

    No, I sold them immediately, thus no gain. Bought for 6.8 RMB, sell for one USD, for example. If I’d held them, I’d have gained about 40%, though!

  • Shishioo
    4 months ago Shishioo

    I see, a shame indeed you sold them. Did you buy Bitcoins from one of the Chinese exchanges?

  • AU_is_better
    4 months ago AU_is_better

    And spend an hour plus at the bank? Fuck that. With btc, my dollars are ready to spend on my Bitpay card within 15 minutes of sending rmb to BTCC.

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