China’s Sichuan moves to ban digital currency transaction processors

The Financial Administration in the Sichuan province has issued a notice to its subordinate offices telling them to “guide mining entities to end their mining activities in an orderly manner.”

The move comes as a surprise because recently, local governments in China encouraged digital currency transaction processors to utilize the excess hydroelectric power being generated in the area.

The Financial Administrator’s Notice

The notice reads, “Hydroelectric power generation enterprises in our county shall immediately stop the investment of virtual currency ‘mining’ activities and shall not add new virtual currency ‘mining’ projects…Otherwise, our bureau will recommend the county people’s government to investigate and deal with illegal construction projects, take bans, fines, order self-demolition and other administrative measures until it is handed over to the people’s court for compulsory enforcement.”

The notice encourages hydroelectricity producers to not give their excess electricity to block reward miners. It even threatens action by law enforcement if individuals ignore the notice and continue to support the sector.

Throwing a wrench in processors’ plans

The Financial Administrators notice comes at a time when many block reward miners in China are looking to increase their use of hydroelectricity. China’s rainy season begins in late May and ends in October; during the rainy season, the vast amounts of rainfall drive down hydroelectricity prices.

In the past, we have seen block reward miners increase their hash rate during the rainy season due to the reduced electricity prices. But given the Financial Administrator’s warning, it is unclear how miners and hydroelectricity producers are going to move forward this year. So far the hash rate has been much lower than in previous rainy seasons.

It is not clear why The Financial Administrator in the Sichuan province is cracking down on block reward mining, but the notice is bound to have an effect on operations in the near to long term. The Sichuan province currently accounts for 9% of the hash power pointed at the BTC network, and with the recent notice, you can expect that number to decline.

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