Chinese Region to Shut Down 'Illegal' Bitcoin Miners By September

China's Xinjiang Uyghur autonomous region is set to eliminate "illegal" bitcoin mining operations by the end of August, a government agency has confirmed to CoinDesk.

Rumors first emerged online over the weekend after the leak of a government notice issued by Xinjiang's Economic and Information Commission (EIC) indicating the authority was demanding that local utility companies report and shut down illegal bitcoin mining operations.

An official from the commission – a local government agency focused on technological development – confirmed the authenticity of the document to CoinDesk on Monday, saying it was drafted by the EIC's unit in charge of the region's utility issues. No further comments were provided.

According to the document's definition, illegal bitcoin miners refers to any operation that is not registered with the government as a licensed business entity or has been using electricity without formal contracts with utility firms.

It further states that utility companies in the region are now tasked with the mission of shutting down such unlicensed operations and reporting back to the authority on their progress by the end of August.

"Local utility agencies and companies will be held accountable if they failed to shut down 'illegal' bitcoin mining operations," the EIC writes.

The effort follows a notice issued in January that required Xinjiang's utility companies to make regular reports to the authority on local bitcoin activities as part of a wider move to eventually guide these entities to an "orderly exit" of the business in the region and nationwide.

That crackdown has already affected miners operating farms in Xinjiang. Scott Meng, the chief executive of a Canadian blockchain startup who also jointly owns mining farms in the region, told CoinDesk that the government's notice early this year "definitely had impact" on bitcoin mining operations.

He said:

"I have two partners (in the region): one has 18,000 crypto miners, the other has 40,000. And they have been crying for help in the past days, urging me to look for places in the U.S. and Canada (as substitutes). But even for me, I have to get electricity first. And even if I had that, we need to build farms from scratch."

In June 2017, the EIC also issued a notice to municipal governments asking them to be careful when supporting bitcoin mining companies.

"These operations contribute nothing to the region's economy besides consuming a spiking volume of electricity," the EIC said at the time.

Those orders were issued at a time when bitcoin miners were increasingly looking to the cheap electricity and vast land resources available in regions like Xinjiang as means of boosting their operational profits.

For instance, in November 2016, Bitmain notably announced a plan to build a datacenter for bitcoin mining in Xinjiang. The firm declined to confirm to CoinDesk for this article if it is still operating any mining farms in the region.

Tian Chuan contributed reporting. 

Electricity pylons in Xinjiang image via Shutterstock