Mining Clearance Follow-up: Northwest Clearance, Southwest Still Stable, North America Central Asia Great Migration Already on the Way

Almost all of the local mines in Inner Mongolia and Xinjiang have been relocated to the southwest or overseas after the tightening of regulatory policies.

Mining Clearance Follow-up: Northwest Clearance, Southwest Still Stable, North America Central Asia Great Migration Already on the Way

2021 is not a good year for miners. The tightening of regulatory policies has left mines on pins and needles, even relocating their families overseas in search of a “happy place”.

First, at the end of February, the Inner Mongolia Development and Reform Commission (NDRC) solicited comments on the “Measures to Ensure the Completion of the 14th Five-Year Energy Consumption Double Control Target (Draft for Comments)” (hereinafter referred to as “Draft for Comments”), which proposed a comprehensive cleanup and shutdown of virtual currency The measures propose to completely clean up and shut down virtual currency mining projects, and withdraw them all by the end of April 2021. During the “14th Five-Year Plan” period, the scale of data center construction will be controlled in a reasonable and orderly manner, and new virtual currency mining projects will be strictly prohibited.

At the end of May, the Inner Mongolia Autonomous Region drafted the “Eight Measures of the Development and Reform Commission of the Inner Mongolia Autonomous Region on Resolutely Combating and Punishing Virtual Currency Mining” (Draft for Comments), which is a severe crackdown on mining behavior.

On the same day, the National Energy Administration’s Sichuan Regulatory Office issued a notice on the convening of a research forum on virtual currency “mining”. A person close to the Sichuan regulation told the China Business News: “This meeting was held to understand the collection of the situation.”

The Northwest mining site is basically retired
The tightening of the policy has forced some mining farms to close their computing centers. Zhang Ling, a mining industry practitioner, told Chaintech App that after the tightening of regulatory policies in Inner Mongolia and Xinjiang, almost all of the local mining farms have been relocated, and only a small part of them are still running under the name of “big data center”, but they have also started to prepare for relocation.

Zhang Ling believes that mining farms are almost impossible to hide under the crackdown of regulators. The current mainstream data center single cabinet server capacity is generally 16-20, while the number of mining machines in a single cabinet of a bitcoin mining site can reach dozens. The rated power of a single mining machine is much greater than that of a rackmount server. Taking the Ant Mining S9 as an example, the S9 is rated at 1320W, while a typical rackmount server is rated at about 500W. A medium-sized mine with 5,000 Ant S9 mining machines deployed consumes up to 6,500 degrees of electricity per hour just for the cabinets, and the daily electricity bill is up to 50,000 RMB. With local small thermal power units being retired, the high electricity costs will not only put the mine under regulatory scrutiny, but also give the mine the option to relocate to a lower risk and cost area.

Southwest regulatory policy expected to be smooth
A mining machine seller Li Nian told Chaintech App that the main buyers of the used mining machines it operates are gradually shifting from the northwest to the southwest and overseas.

The southwestern region has hydropower as the main source of electricity. Take Sichuan as an example, as the province of a thousand rivers, Sichuan is also a large water resource province, with 7,415 rivers of all sizes in the province and a total of 261.6 billion cubic meters of water resources. At the same time, Sichuan is also a large hydropower province, as of the end of 2020 hydropower installed capacity reached 83.01 million kilowatts, the size of about 40.1 million kilowatts under construction. And small hydropower stations account for nearly 40% of them. According to statistics, Sichuan province has 5025 hydropower stations with installed capacity of less than 50,000 kilowatts in a single station, with an installed capacity of 15,585,900 kilowatt hours.

However, the abundant hydropower in Sichuan Province cannot be fully consumed. Due to the phase imbalance between supply and demand, the construction of the outgoing channel is blocked, the provincial hydropower station regulation capacity is weak and other factors, Sichuan Province since 2012, there are different degrees of “abandoned water” every year, in 2016, there were up to 14.1 billion kilowatt hours of surplus hydropower can not be online, resulting in the province’s hydropower station about 4 billion yuan of power generation income in vain In 2016, there was a maximum of 14.1 billion kWh of surplus hydropower that could not be brought online, resulting in a loss of about 4 billion yuan of power generation revenue from hydropower plants in the province.

The most serious abandonment of water is also these small hydropower plants without grid connection. Due to the high cost of grid-connected power generation infrastructure and the inability to guarantee profitability, small hydropower stations have been cooperating with mining farms since several years ago, and many of them are even built by the hydropower stations themselves. The mine owner told Chaintech App that from Chengdu, along the G5 Jingkun Expressway towards Ganzi Prefecture, there are many small hydropower plants and mines distributed in the mountains on both sides, showing a symbiotic relationship between the two.

Therefore, although the Sichuan Regulatory Office of the National Energy Administration issued a document to investigate mining sites, Li Nian believes that the policy will not be tightened quickly, so the overall mood of the Sichuan mining circle remains stable.

Central Asia, North America become new options for mining industry
As for the mines that have chosen to relocate overseas, the main target has also changed, shifting from the Middle East and Russia a few years ago to Central Asia and North America.

In order to achieve the goal of carbon neutrality, the Middle East and Russian countries have also gradually tightened their policies in recent years. Iranian President Rouhani said on May 26 local time that all cryptocurrency “mining” activities in Iran (including legal ones) must stop until Sept. 22, Qatar’s Al Jazeera reported on its website on May 26. Rouhani said that in Iran, legal cryptocurrency “mining” activities consume only about 300 megawatts of electricity, but illegal “mining” activities consume up to 2,000 megawatts of electricity. Over the past few years, Iran has confiscated thousands of illegal “mining” platforms. The government has recently called on the country’s intelligence services to crack down on illegal miners and is considering offering a bonus of 200 million rials (about $900) to those who report illegal “mining” activities.

Russia has been very sensitive to the mining industry, and although it accounts for 7 percent of global computing power, overseas mines are under the close scrutiny of local regulators. One mine owner, Wang Xing, told Chaintech App that they had planned to relocate their mine to Russia, but were seized at customs and had to break down the mining machines and ship them to the region in the form of parts.

Compared with the strict regulations in the Middle East and Russia, the policies in North America and Central Asia are relatively lenient, which has become a new choice for mining farms.

A staff member of Algorithm Bee has told CNN that the company’s mine is preparing to move abroad and plans to move to Pakistan or Russia. Recently, Jiang Zhuoer, founder of Lepit Mining Pool, said on Weibo that the joint mining business would no longer be open to mainland China and that it would deploy mining farms to mine mainly in North America in the future. U.S.-listed Bit Mining (formerly 500 Lottery) also released an announcement on its official website about overseas investment in building mining farms.

On May 19, Bit Mining announced that it had signed a legally binding investment clause with Dory Creek, a wholly-owned subsidiary of Bit Fawn, under which the two parties will jointly invest in building a cryptocurrency mine in Texas, USA. The total amount to be invested by Bit Mining is $25.74 million.

According to the terms, the proposed Texas mine, with a total operating load of 57.2 megawatts, will use more than 85% clean and low-carbon environmental energy to generate electricity.

Immediately following the announcement, on May 24, Bit Mining announced that it will invest a total of RMB 60 million in Kazakhstan to build and operate a 100 MW mine with a Kazakh company. After the mine is completed, the company will hold 80% of the equity in the Kazakhstan mine and the partner will hold 20%.
Note: All interviewees in this article are pseudonyms.

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