The province of Yunnan went from 10.23% to 5.4% of global hash rate dominance. The loss of dominance of Bitcoin mining in China contributes to the decentralization of the cryptocurrency.
The authorities of the Chinese province of Yunnan recently released a document proposing to investigate the illegal use of electricity. They propose including citizens, companies, and institutions involved with unauthorized Bitcoin mining.
The document is titled “Notice from the Yunnan Province Energy Administration on Strengthening Energy Management of Bitcoin Mining Companies.” It proposes actions such as cutting off the electricity supply to those who mine illegally before July.
The Yunnan authorities have not published the document officially but have only issued it internally. Some Bitcoin mining machines have stopped and more may follow, according to the officials.
The penalty could lead to the closure of the establishment, hoping that those responsible will “rectify” such activities considered illegal.
Provinces Must Reduce Permits for Cryptocurrencies
In May, China’s Finance Committee addressed measures on Bitcoin mining and trading. The first province to start taking action according to this plan was Inner Mongolia.
Xinjiang, Qinghai, and Yunnan also joined massive cryptocurrency mining bans. These provinces have announced that the measures could shut down any company that violates the new laws before July.
These actions are part of the objectives that the State Council set for the Chinese provinces. In that way, they take measures on Bitcoin and other mining and commercial activities, according to the Qinghai Department of Industry and Technology.
The Finance Committee seeks to investigate, sanction, and suspend the supply of energy to illicit cryptocurrency mining activities. The intention is to prevent mining establishments from making illegitimate profits without permission.
Regions like Inner Mongolia have started to investigate and “fix” projects that could use these types of virtual assets. Since another document suggested investigating cloud mining, they extended the warning to Internet-related technological companies.
Bitcoin Mining in Yunnan Uses Green Energy
Inner Mongolia has many fossil resources while Yunnan is the second largest hydroelectric producing province. Although the latter uses “cleaner” energy than other regions, central China’s policy blocked cryptocurrency mining there.
Zhang Nangeng, CEO of Canaan, a company that manufactures ASIC Bitcoin miners, has criticized such measures. He believes that China should not restrict mining that uses renewable energy such as hydroelectricity.
However, this would not be a global action against all Bitcoin mining in the region, but against “unauthorized” individuals or companies. However, some mining companies would be forced to migrate out of Yunnan and China.
Lower Hash Rate Dominance Helps Decentralize Bitcoin
The loss of global dominance of China’s hash rate will help decentralize Bitcoin mining. Some sources state that this restrictive policy on cryptocurrencies and mining has contributed to this in recent months.
According to the University of Cambridge, from 2019 to April 2020 China mined more than half of the global supply. From February to April 2020, the Asian country went from 72.03% to 65.08% in average monthly hash rate.
The province of Xinjiang has had 30% of hash rate in China during this period. Yunnan went from 10.23% in September 2019 to 5.4% of the global hash rate dominance in April 2020.
China’s hash rate dominance has fallen by as much as 55% so far this year. That situation started after the bans that have caused the mass departure of Chinese mining farms for other countries.
By Alexander Salazar
