Allegedly Illegal Crypto Mining Operations Uncovered By Chinese Authorities: Report

Omar Faridi

Authorities in China’s Sichuan province have reportedly launched an investigation into local bitcoin (BTC) mining operations that might not have obtained government approval.

According to a state-owned news media outlet, the land-resource bureau, situated in Sichuan’s Garze County, uncovered several bitcoin mining farms, located at hydropower station sites, that had allegedly not been permitted to conduct operations.

Allegedly Illegal Construction of Mining Farms Uncovered

As noted by local sources, the Economic and Information Bureau in Garze County, a mountainous region with a humid continental climate, has established a committee with other local investigation agencies. The committee has conducted an investigation into the allegedly illegal construction related to various unregistered crypto mining farms.

Commenting on the matter, a representative from the nation’s Economic and Information Bureau noted: 

We are still investigating on the issue and can’t disclose more details on the overall situation.

Mining Farms Taking Advantage of Cheap Electricity

As confirmed by local news outlets, the mining farms have been constructed at hydropower stations located alongside the Dadu river in the northwestern region of Sichuan province. Presumably, the mining operations are being conducted in the area due to the availability of abundant and relatively cheap electricity.

Notably, Chinese authorities uncovered a large bitcoin mining setup located inside a hydropower plant known as Ginkang station. The facility reportedly has a capacity to operate 50,000 units of BTC mining machines. Currently, the unregistered facility is utilizing 60% of its total mining capacity.

Chinese Miners Anticipating High Rate of Return Due to Rainy Season

According to a worker from the region’s land resource bureau:

If [a Bitcoin mining facility] is built within the authorized area of a power station for electricity consumption, we need to verify if their usage is legal. If it’s outside the authorized area, then it needs to be dealt with as the construction was not approved.

As noted by CoinDesk, the summer rainy season is approaching in China’s Aba and Garze counties, and local mining farm operators are planning to take advantage of cheap electricity rates - in order to profitably mine Bitcoin and other cryptocurrencies.

In November 2018, blockchain-related research firm Coinshare had released a report in which it revealed that approximately 50% of the world’s Bitcoin network hashrate had come from mining operations based in the Sichuan province.

Bitcoin Network Hashrate Sees 80% Increase

As cryptoasset prices have begun to recover, the Bitcoin network’s hashrate has surged to almost 58,000 petahashes per second. Notably, this represents an 80% increase from December 2018. At that time, over 600,000 mining units reportedly suspended operations due to the extended bear market that lasted throughout 2018. 

Clarifying that Garze County does not allow companies to setup Bitcoin mining farms in the area, a spokesperson from the Economic and Information Bureau said: 

We don’t allow outside investment in the area to be involved in bitcoin. Even for big data projects, we will conduct an investigation into the nature of the data involved before making a decision.