A number of Bitcoin mining firms have apparently been forced to cease operations in China’s Sichuan province. This is according to a report by People’s Daily – the biggest newspaper group in China and the official newspaper of the Chinese Communist Party.
Bitcoin mining is a very energy-intense process, highly competitive and dependent on economy-of-scale to maintain in times of tight profit margins. As a result, mining firms have clustered in regions of the world where electricity is both cheap and abundant. This usually means that bitcoin mining is done in huge complexes in proximity to natural sources of energy such as the hydroelectric dams that China’s southwest is known for.
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Now, due to the shutdown of just one mining firm, the Bajiaoxi Mining Factory at Bajiaoxi Hydropower Station, the local energy company is estimated to lose about ￥1 million ($147,000) in electricity fees per month, according to the report.
A local Chinese government official said: “The closure aims at cracking down on illegal cash operations and on controlling systemic risks.” This is reminiscent of the language used by the People’s Bank of China when it revealed its investigation of the country’s Bitcoin exchanges.
While this may be a further sign of rising elements within the Chinese administration looking to restrict the country’s booming bitcoin ecosystem, it might be good news for the international acceptance of the cryptocurrency. In a recent interview with Finance Magnates, the CTO of the largest bank in Israel told us that banks shy away from bitcoin in part because of its mining centralization in China.