Sichuan Provincial Development and Reform Commission and Sichuan Energy Bureau issued a joint notice demanding the shutdown of reported cryptocurrency mining pools by June 20, and a province-wide investigation for suspicious mining operations by June 25, as reported by Caixin on June 18. The Sichuan government orders electric power enterprises in the province to screen and eliminate cryptocurrency mining operations. The notice also detailed 26 suspected mining projects that have been investigated by the State Grid Corporation of China (SGCC), among which five were new projects launched this year, 18 in 2020, two in 2019, and one in 2018.
The order from the Sichuan government stems from the central government’s clean-up of the issuance and exchange of non-legal tender cryptocurrency due to negative impacts on financial markets and the power system. PBoC announced in October 2017 that it would ban domestic cryptocurrency issuance along with primary and secondary market trading. In addition to the difficulties of preventing cross-border money laundering via cryptocurrency and standardizing the digital currency market, cryptocurrency mining is also extremely energy-intensive. To illustrate, the total energy required to mine a bitcoin averages at 130 TWh, and the annual electricity consumed worldwide for bitcoin mining nearly matches that of the Netherlands’ national usage, according to the Cambridge Centre for Alternative Finance.
In China, most mining operations are in areas with cheaper electricity prices such as Xinjiang, Sichuan, and Inner Mongolia, each contributing to 36%, 10%, and 7% of the global bitcoin network computing power (hash rate). The mining pools in these provinces significantly intensified the local power loads and associated greenhouse gas (GHG) emissions, especially in the northwest regions where the mines relied heavily on thermal power. Therefore, against the backdrop of China’s green transition towards carbon neutrality, many of these regions have taken a tougher line on mining operations. For example, Inner Mongolia announced this February to prohibit the construction of new cryptocurrency mining projects and decommission all current mining projects by the end of April. On June 9, Xinjiang and Qinghai also issued similar notices to shut down local cryptocurrency mines. Although the mines in Sichuan mainly depend on cleaner, more sustainable hydropower, the recent crackdown in Sichuan reflected the central government’s hardened stance on mining operations regardless of power sources.