Over 20 bitcoin mining farms in Chinese Inner Mongolia have been deprived of the benefits of electricity after a crackdown by the local government.
Stop the discounts on electricity
A document issued by the Inner Mongolia Autonomous Region's Department of Industrial and Computer Technology on Aug.24 shows that the government agency has requested a local electricity trading company to exclude 21 bitcoin mining companies from participating in the energy trade.
Chinese crypto industry news source Wu Blockchain was the first to report the document, but did not specify company names on the list. Among the best-known names affected by the decree are two branches of the bitcoin mining giant Bitmain based in Inner Mongolia and another branch of the mining equipment manufacturer Ebang.
Also on the list is China Telecom's Inner Mongolia branch, based in the city of Ordos. This suggests that the telecom giant may also be involved in cryptocurrency mining in the region.
The suspension means that these mining farms will no longer be able to enjoy the electricity discounts that come from a liquid energy market featuring the Inner Mongolia Power Group, a state-owned energy trading company in the region.
The impact on the mining sector of Bitcoin
Kevin Pan, CEO and co-founder of China's PoolIn mining pool, said these policy decisions will have some impact on the industry, at least in the short term. Electricity for these companies is likely to increase by 0,1 yuan, or $ 0,014, per kilowatt hour (kWh), he said.
The current cost of electricity for mining farms in the region is approximately 0,26-0,28 yuan per kWh ($ 0,037 to $ 0,040). With the new energy policy change, the top of the range could reach 0,38 yuan per kWh ($ 0,054), Pan said.
Such an apparently negligible difference would actually mean a sizable increase in operating costs for energy-intensive crypto mining activities. If a mining farm is operating at a full capacity of only 10.000 kWh, considered a relatively small scale in the industry, an increase of $ 0,014 per kWh means that the farm will have to incur an additional $ 3.360 in operating costs per day.
The document, addressed to Inner Mongolia Power Group, says the suspension notice came following a government agency on-site inspection of more than 30 big data and cloud computing companies in the region such as Bitcoin Revolution, in which it emerged that 21 of them are actually crypto mining farms.
Inspections at the regional level started late last year. The goal was to shut down bitcoin mining companies without proper business registrations. The government also targeted companies attempting to obtain electricity benefits by disguising themselves as eligible.
According to the Bitcoin Electricity Consumption Index compiled by the University of Cambridge, China held over 65% of the global computing power of bitcoin mining as of April this year. Inner Mongolia represented 8% of the total network at the time.
