China's crypto-miners look abroad as regulators tighten noose
When a prefecture in northwestern China's Xinjiang region ordered a halt on cryptocurrency mining projects this month, Chris Zhu scrambled to move clients' machines southward, spending over weekly to reassemble in Sichuan.
But following the shift, he received another notice -- authorities in southwestern Sichuan were also putting an end to the industry, in a turbulent year which has lost his company millions.
"We're thinking of methods to go abroad," said Zhu, whose company handles the maintenance of mining machines.
He's among businessmen and miners now planning to seek their fortunes overseas -- in countries which range from the United States to Kazakhstan -- as Beijing tightens the screws on the industry.
Crypto-mining may be the process where computers generate a number of complicated hexadecimal number sequences had a need to mint new virtual currency and validate financial transactions -- an activity that requires massive levels of processing power.
Chinese mines power practically 80 percent of the global trade in cryptocurrencies despite a domestic trading ban since 2017, relying on the competitive advantage of cheap access to power and hardware.
But several provinces have recently ordered the closure of mines.
Mountainous Sichuan was China's second-biggest bitcoin mining province, according to data published by Cambridge University that tracked the world's most significant digital currency.
Authorities have also ordered shutdowns in the coal- and hydropower-rich parts of Inner Mongolia and Qinghai, with citizens encouraged to report illegal operations.
A lot more than 90 percent of the country's bitcoin mining capacity has been shut down, according to estimates published by state media tabloid Global Times.
Zhu estimates that 10 to 20 percent of miners in China have started their move abroad.
"We spent around 10 days getting to Sichuan, only for businesses to avoid there too," he told AFP. "It will likely be tough to keep here."
Zhu's company INBTC handled a 260-megawatt site in Xinjiang before being forced to pull the plug.
"With the hit on Sichuan, we'd nothing left," he said.
On Monday, U.S.-listed Chinese firm BIT Mining announced it had delivered its first batch of 320 mining machines to Kazakhstan, after Sichuan authorities ordered power companies to stop supplying electricity to crypto-miners.
It will ship its remaining mining machines abroad.
Nic Carter, general partner at Boston-based venture fund Castle Island Ventures, considers the problem "an effective terminal shutdown on mining in the country".
He said that 50 to 60 percent of the bitcoin hashrate -- a way of measuring the entire computing power found in the bitcoin network -- could possibly be relocated out of China.
"Everyone I've talked to, in China as a miner, wants hosting outside of the country," said Carter.
Industry players say Central Asia and North America are popular destinations Chinese miners are thinking about.
"When you could mine in China, many persons were not ready to go abroad," said a Chinese miner surnamed Li, who has three mines in Kazakhstan.
He said he moved his procedures out in 2018 for cheaper electricity, and is currently helping friends export "thousands of" bitcoin mining machines.
Carter added that upstate New York is another popular destination, while Texas is often cited as a mining location. The southern state's governor also has an accommodating stance to mining.
"Miners are going to be taking that into account," he said. "Historically, the largest risk to them isn't power prices... it's political risk."
For the present time, industry players say the exodus hasn't quite started, with many still looking for suitable destinations.
Analysts have pointed to financial risks and energy goals as reasons for China's crypto clampdown.
Bitcoin and other cryptocurrencies can't be traced by a country's central bank, making them difficult to modify.
Beijing is also thought to fear the proliferation of illicit investments and fundraising, with crypto transactions threatening controls.
On Monday, China's central bank said it told five major banks and payment giant Alipay to halt crypto-related transactions.
"Virtual currency transactions and speculation disrupt the standard financial and financial order, breeding the chance of criminal activities such as cross-border asset transfers and money laundering," it said.
Another factor is energy consumption in mining, as Beijing forges ahead with plans to attain net-zero emissions by 2060.
Although miners in Sichuan often use hydropower to power their equipment, with some moving procedures there in the rainy summer to tap these resources, China also uses particularly polluting kind of coal to power some of its mining.
Bloomberg predicted China will never be able to meet its cryptocurrency industry's needs through renewable energy until 2060.
Crypto-mining is likely to use 0.6 percent of the world's total electricity production in 2021, according to Cambridge University data.
With relocation underway, Carter of Castle Island Ventures said: "Transactions will clear more slowly, for a period of months probably."
Source: japantoday.com
