Chinese Regulators Demand a Clean-Up of Crypto Mining in Inner Mongolia
China’s Inner Mongolia Autonomous Region has recently issued a notice demanding to clean up cryptocurrency mining operations within the region where bitcoin mining is concentrated.
As local crypto outlet ChainNews reported on September 14, five departments under the Inner Mongolia government have issued a notice to rectify the mining industry within the province, claiming
“The ‘mining’ industry of virtual currency belongs to the pseudo-financial innovation unrelated to the real economy, and should not be supported. The Development and Reform Commission, the Public Security Department, the Department of Industry and Information Technology, the Financial Office and the Big Data Bureau decided to carry out a clean-up and rectification of such enterprises and have them orderly exit from the region.”
Inner Mongolia, together with Xinjiang and Sichuan, are the big three bitcoin mining bases in China producing almost 60% of global hashrate. Among them, bitcoin mining in Inner Mongolia and Xinjiang are mostly fueled by non-renewable energy coal, while Sichuan is making good use of its abundant hydropower for bitcoin mining. A Morgan Stanley research showed that Sichuan generated 90% of all electricity with renewable energy, by contrast, Xinjiang generated 23% of its electricity with renewables, and Inner Mongolia generated only 16% of its electricity with renewables in 2017.
Noticing the surging energy consumption of bitcoin mining, Xinjiang has taken the lead demanding a phase-out of illegal bitcoin mining operations last July; this May, authorities in Sichuan also said they had been investigating illegal crypto mining farms. But it seemed to have little actual impact on Chinese miners who already operated in a legal grey area.
This time, regulators in Inner Mongolia seem to take it more seriously by investigating not just crypto mining operations, but also “legit” businesses under the name of “cloud computing, big data, blockchain and IDC (internet data center)” which are mostly crypto mining in disguise.
If this order from local government was strictly followed through in Inner Mongolia, costs for bitcoin mining in China may increase and bitcoin hashrate may be influenced in the upcoming dry season. As miners used to opportunistically relocate their mining device in Sichuan to Inner Mongolia/Xinjiang once the wet season (from May to September) in Sichuan comes to an end.
Back in April, China’s state planner said it wanted to eliminate crypto mining throughout the country for the concern about energy usage and environmental pollution, but no such ban has entered into law so far.
In such a context, most large-scaled bitcoin mining farms in the country have early sought solutions by moving abroad. Some people also propose to use clean energy such as overabundant hydropower in southwestern China (Sichuan/Yunan/Guizhou), and wind/solar energy (most wasted) in the northwest like Xinjiang and Inner Mongolia as electricity supply for bitcoin mining. Apparently it failed to gain support given the regulator’s unamicable attitude towards cryptocurrency.