China’s Crypto Miners Seem to Be their Own Undoing

Huawei
China’s Crypto Miners Seem to Be their Own Undoing
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Late last week, XinhuaNet, a media company operated by the Chinese government, reported that local police had arrested an illegal cryptocurrency mining operation that was responsible for energy loss amounting to about $3 million.

According to the post, the incident happened in Jiangsu, a city in the Eastern-Central coastal province of China. The police officers reportedly confiscated up to 4,000 hardware units- all of which were being employed in illegal cryptocurrency mining- in a raid that covered about nine separate mining farms.

The police were reportedly alerted after a local electricity provider reported that energy consumption in the area had been on a suspicious upsurge. The resulting investigation lasted about two months, after which the police in Jiangsu, with the aid of their colleagues in the nearby region of Zhenjiang, were able to discover the locations of a group of criminals involved in the operation.

A single mining unit was said to have used between 20 to 50 Kilowatt hours of electricity on a single day, and according to a report from the power supply company, they had taken up electricity worth as much as 20 million Yuan (about $2.91 million at press time).

The report comes at a time when the state of the cryptocurrency industry in all of China is murky at best. China already banned cryptocurrency exchanges, Bitcoin trading, and Initial Coin Offerings (ICOs) for the better part of two years, but in that time, it seems that the crypto mining industry has continued to thrive regardless. 

The growth of the mining industry has been largely due in part to the influence of Bitmain Technologies Limited. Still the world’s largest manufacturer of mining equipment, Bitmain Technologies has established a steady presence in the industry, with data from Blockchain info revealing that the company controls up to 33 percent of the total hash rate in the world. 

Miners have also come to love the country as well, thanks in large part to the abundance of cheap electricity. Southern China is reportedly responsible for up to 50 percent of all Bitcoin mining computingb power, and thanks to the recent rally that these assets have been on for the past few weeks, mining in China seems to be in a boom for sure. 

However, Bitmain and other parties involved in the Chinese crypto mining industry have been forced to stay on the edge of their seats for the past few months, as multiple reports have alluded to a possible crypto mining from the Chinese government. 

Back in April, the National Development and Reform Commission (NRDC) published some amendments to its guidance for adjustments required to China’s core industrial structure. The amendments included some industrial sub-categories that are to be encouraged, curtailed, and restricted, and cryptocurrency mining was included in the categories set to be eliminated at once. 

Not much has been said about the adjustments since then, but if the country’s industrial juggernauts are seeing that crypto mining would be problematic, criminal busts such as this would definitely not help the industry’s case.  So far, judicious mining seems to be the only way for miners to conduct their operations in peace. Poking the bear by stealing electricity to mine will only make things worse.

About Jimmy Aki

Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.