China Suspends Crypto Mining Farms In Xinjiang And Guizhou For Broad Audit
In line with all their crypto-related decisions to date, the Chinese government has suspended all crypto mining operations in Xinjiang and Guizhou provinces in order to perform tax inspections and real-name registration checks.
The inspection being on November 5 and is reportedly still ongoing, with the local news outlets reporting that the mines are still not operational.
Miners losing over $100,000 daily
According to the local news outlet, the power supply for the companies conducting mining operations was suspended on November 5, 2018, which brought the mining to a halt.
The same source reports that inspections encompassed mining farms’ tax information, funds, and customer information, through a series of very strict audits.
It is being estimated that by not being able to operate, mining companies were loosing around 1 million Yuan daily in cryptocurrencies, worth approximately $143,700.
A real-name system
In accordance with the highest level of scrutiny practiced by the Chinese government since the rise of the crypto business, China’s Public Security Department has issued an order by which all companies conducting mining operations have to implement “higher standards for the company’s business real-name system,” if they want to keep their business operational.
Mining firms were given agreements to sign in order to ensure that new rules will be respected, and that way the inspection process has ended. However, the mining farms are still not operational at press time despite completing the audit.
The delay in reinstating the operation is linked to the power grids in the region, which supposedly are too weak to support the energy requirements of the mines. The local news outleet reports that the State Power grid is looking to have the mines either relocated to another region or to simply limit the amount of power the mines can use.
High level of scrutiny is chasing away companies
Recently, a cryptocurrency mining equipment producer, Bitmain, invested in 90,000 S9 Antminer ASIC Bitcoin mining machines, which they’ve placed in the Chinese province of Xinjiang.
Knowing that the market value of each such machine is $3,000, we come to the conclusion that Bitmain invested more than $270 million into the new mining facility.
If they have been affected by this latest practice of authority by the Chinese government, their losses would surely be surpassing the estimates.
Big players don’t like losing money due to the arbitrariness of the government, so it is no wonder that the largest mining companies are looking for a way out of the unfriendly legal environment.
More attractive alternative locations
News that Canada is, despite some teething troubles, considered to be a favorable environment for mining firms.
Bitmain, ZQMiner, and BTC.Top are just a few companies which applied to migrate their operations into the favorable Canadian climate, which is also rich in land and natural resources.
Meanwhile, even the United States, which, compared to some other countries have a relatively high price of electricity, became the destination suitable for mining cryptocurrencies. Mining firm Coinmint recently revealed their plans to invest $700 million into the 435 MW of the mining capacity in upstate New York.
The arbitrariness of the Chinese government
It is unknown if the Chinese government is practicing the same amount of scrutiny on other types of large-scale businesses in their country but shutting down legal operations, and making them lose hundreds of thousands of dollars daily is against all rules of the western free market.
Chinese firms have already begun looking for alternatives, with Bitmain’s competitor, Bitfury, announcing their plans to conduct an initial public offering in Amsterdam or London and Bitmain conducting a public offering in Hong Kong.
Looking at the history of the Chinese government’s treatment of crypto-related businesses, we can expect more big players to follow the example of Binance or OKEx, and run away from the harsh and overly traditional Chinese legislation.