China’s Inner Mongolia autonomous region is carrying out an inspection to eliminate “illegal” bitcoin mining operations by October, a government spokesman said, confirming a local report.
An official document detailing the inspection plan was leaked to Chinese media which published photos of the decree from the Inner Mongolian regional authority.
“The inspection is directed by the central government, rather than a standalone plan initiated by the local government,” an industry executive involved in the planning process told CoinDesk.
“The move reflects the nationwide phase-out plan on the bitcoin mining,” the source said. The government’s plan is to drive the digital currency mining industry from China by 2021..
According to the 10-page document, data centers that provide facilities for bitcoin miners and unregistered bitcoin mining businesses will be closed.
The local authorities leading the raids will target any bitcoin mining operation that tries to get preferential electricity prices and tax breaks by pretending to be a sanctioned user, such as a big data company or cloud computing host.
Existing bitcoin mining businesses that pass the inspection will be categorized as “limited companies” that should pay the official electricity rate and not negotiate with power stations directly. They will still be expected to shut down their mining operating by 2021.
The region-wide inspection is being rolled out in two phases.
The municipalities are carrying out the inspections from Sept. 3 to Sept. 25 and then.reporting their findings to the regional government, which will form a team to investigate the findings from each jurisdiction from Oct. 10 to Oct. 20..
Inner Mongolia, in northern China, is among the most suitable areas to operate bitcoin mining businesses thanks to its cheap electricity supply, low land prices, cold weather and a small population.
Such conditions help miners by reducing their biggest cost – electricity – cooling equipment more quickly and avoiding densely populated areas that would be bothered by noisy operating machines. Bitmain, one of the largest bitcoin mining companies, has had operations in the region.
China started to crackdown on bitcoin mining operations before the formal announcement in April by the National Development and Reform Commission, the primary government agency for economic planning.
The NDRC’s position indicated that the mining industry should be phased out of China as it does not fit in the future economic development plan of the country. Trading and possessing cryptocurrencies is illegal in China as part of broader currency controls, but crypto use is prevalent on the black market.