Mining rig maker Canaan argues against wholesale crackdown on bitcoin mining in China

HIVE Digital Technologies

02/06/2021 08:50

SHANGHAI/HONG KONG, June 2 (Reuters) - A major Chinese maker
of bitcoin mining machines argued against an indiscriminate
crackdown on cryptocurrency mining in China, saying the business
helps make better use of electricity and contributes to
employment and the local economy. 
    Zhang Nangeng, CEO of Nasdaq-listed Canaan Inc  CAN.O , told
an earnings conference call that although cryptomining
activities using fossil-fuel power hampers Beijing's green
efforts, those powered by clean energy should be spared from the
crackdown.
    "For-profit miners prefer regions with low electricity
prices that indicate oversupply, and likely energy waste," Zhang
said. 
    In addition, "bitcoin miners also help create jobs in
impoverished regions and contribute to fiscal coffers."  
    Zhang's comments come after China's State Council, last
month, ordered a crackdown on energy intensive bitcoin mining
and trading, and Inner Mongolia, a major mining centre, proposed
measures to root out the practice.  urn:newsml:reuters.com:*:nL2N2ND0SQ 
    Energy regulators in southwest Sichuan - a province rich in
hydropower - met local power generators on Wednesday to probe
cryptomining in China's second-biggest bitcoin production hub.
 urn:newsml:reuters.com:*:nL2N2NE0QX
    Bitcoin and other cryptocurrencies are created or "mined" by
high-powered computers competing to solve complex mathematical
puzzles in an energy-intensive process that often relies on
fossil fuels, particularly coal.
    Canaan makes machines, or rigs, to mine bitcoins.
    Zhang said policy uncertainty is prodding domestic miners to
move overseas, and causing some clients to hold off placing new
orders for mining equipment. 
    Beijing's crackdown is also prompting some miners to
"undersell" mining equipment, helping knock-down prices, Zhang
said. 
    Spot prices of bitcoin mining machines are down 20%-30% from
roughly a month ago, hurt by falling bitcoin prices.
    To reduce business uncertainty, Canaan is accelerating
overseas expansion, securing long-term contracts, and setting up
its own offshore bitcoin mining business. 
    Canaan, which on Tuesday reported a nearly 500% surge in
first-quarter sales to 402.8 million yuan ($63.12 million), said
overseas markets now contributes to 78.4% of its total revenues.
That compares with just 4.9% in the first quarter of 2020.
    Orders from overseas clients, including Canada's Hive
Blockchain Technologies  HIVE.V , and U.S. crypto player Core
Scientific, also account for more than 70% of total orders.
    Canaan is also expanding into bitcoin mining itself, having
set up an office in Singapore, and is preparing to launch a
cryptomining business in Kazakhstan, in central Asia.
    "Just as it took a long time for bitcoin to be recognized by
the market, there will also be a (long) process for bitcoin, and
cryptomining, to be recognized by regulators" in China, Zhang
said. 
    ($1 = 6.3820 Chinese yuan renminbi)

 (Reporting by Samuel Shen and Alun John
Editing by Shri Navaratnam)
 ((samuel.shen@thomsonreuters.com;  +86 21 20830018; Reuters
Messaging: samuel.shen.thomsonreuters.com@reuters.net))