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Bitcoin hit as China’s crypto mining crackdown spreads to Sichuan

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Bitcoin miners in Sichuan faced a Sunday June 20 deadline to close, with a crackdown now covering greener electricity sources 

(AF) Bitcoin fell to below $35,000 on Sunday June 20 as a deadline for cryptocurrency miners in China’s Sichuan to cease operations arrived. The most widely traded digital currency had been trading around $38,000 on Thursday June 17 but has been falling since China announced its latest crackdown on crypto mining on Friday.

The move to extend a ban on crypto mining to Sichuan indicated that China is not just moving to force the closure of operations that consume electricity produced in environmentally unfriendly ways, including via coal power.

Many of the crypto miners active in Sichuan use hydropower, which is greener than coal-fuelled electricity, but that has not stopped the region from joining other areas where authorities are making a public move to stop bitcoin creation. 

China has until recently accounted for well over half of all global crypto-mining but that seems set to change.

The State Council, China’s cabinet, last month pledged to clamp down on bitcoin mining and trading as part of a series of measures to control financial risks. 

Other popular mining regions, such as Inner Mongolia, cited cryptocurrency mining’s use of electricity generated from polluting sources such as coal when they issued orders targeting the industry.

Friday’s move in Sichuan – where miners mostly use hydropower to run the specially designed computer equipment used in verifying bitcoin transactions – suggests the crackdown is more broadly based.

The Sichuan Provincial Development and Reform Commission, and the Sichuan Energy Bureau issued a joint notice demanding the closure of 26 suspected cryptocurrency mining projects by Sunday.

Sichuan is China’s second-biggest bitcoin mining province, according to data compiled by the University of Cambridge. 

Some miners move their activity there in the wet summer to take advantage of its hydropower resources.

The notice ordered state electricity companies in Sichuan to conduct inspections and make corrections. They were told to immediately stop supplying electricity to crypto-mining projects they have detected.

The authorities urged local governments in Sichuan to start searching for cryptomining projects and shut them down. It banned new projects.

Other regional mining centres including Xinjiang, Inner Mongolia and Yunnan have ordered crackdowns on bitcoin mining.

The Chinese steps to reduce cryptocurrency mining have slowed down the so-called hash-tag rate of generation of new bitcoin.

That of itself would not necessarily bring down the price of bitcoin in the long-term.

But the growing hostility to use of bitcoin and other cryptocurrencies by Chinese authorities is raising concern about global steps to increase regulation of digital currencies.

US authorities have recently stepped up attempts to police the use of cryptocurrencies by criminals, for example.

There is also strong correlation in price movement for different digital currencies and recent strains on stablecoins that are nominally tied to the price of the US dollar have also contributed to selling in bitcoin.

Jon Macaskill

Jon Macaskill has over 25 years experience covering financial markets from New York and London. He won the State Street press award for 'Best Editorial Comment' in 2016


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