Southwestern Provinces in China Crack Down on Crypto Mining Farms with Direct Power Supply

China’s southwestern provinces Sichuan and Yunnan are cleaning up the crypto mining farms with direct power supply. Recently Sichuan province issued a document emphasizing the protection of compliant mining farms and cracking down on crypto mining farms with direct power supply. Now some mining farms with direct power supply have been powered off.

Under the influence of the epidemic, the profits of the State Grid in the first quarter were negative. To crackdown on the traditional direct power supplied mining farms would be conducive to protecting the interests of the demonstration area and the State Grid, but it is indeed a disaster for small-scale hydropower plants and crypto mining farms with direct power supply.

In hydropower-abundant Sichuan and Yunnan, most mining farms get cheaper electricity rates directly from hydropower plants nearby rather than from local or national grids. Such practice is carried out in a legal grey area but makes perfect business sense for both sides. However, it shares the interests of the local/national grids as well as local governments, which may explain why local governments, though want bitcoin mining to bring economic benefits, usually seem to be ambivalent towards the bitcoin mining industry.

State Grid Ya’an, a city in Sichuan, in conjunction with the county economic and technological Bureau, police, mobile and telecom companies, rectified the illegal access of power equipment for bitcoin mining on June 2.

Picture from the local grids

Power plants transfer power to blockchain enterprises without authorization are in violation of the power purchase and sale contract signed with State Grid of China as well as being in violation of power law.

At the beginning of May, multiple local governments in Sichuan, including Ya’an, have shown their support. They have also encouraged cryptocurrency mining operations to help consume excess hydroelectric power during the rainy season. In that way, they would recover from the economic losses due to the coronavirus outbreak. Ya’an, one of the many cities in China’s mountainous Sichuan province, a region that’s estimated to account for over 50 percent of the Bitcoin network’s computing power, has recently issued a public guidance – likely in its first – to seize the “strategic opportunity of the blockchain sector” so that they can help consume the area’s excessive hydropower electricity.

As one of the active county which push the power consumption for crypto mining, the county promotes the development of blockchain technology and industry, cultivate and develop the blockchain industry with the advantage of electricity price, and promote the clean energy consumption of hydropower with the new electricity load through the policy explanation of “building hydropower consumption demonstration area to support the development of blockchain industry”.

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