China said to plan power curbs for some bitcoin miners

Fans cool racks of bitcoin-mining machines at a server farm in Guizhou, China.
Fans cool racks of bitcoin-mining machines at a server farm in Guizhou, China.PHOTO: NYT

BEIJING (BLOOMBERG) - China plans to limit power use by some bitcoin miners, people familiar with the matter said, a potential challenge to an industry whose energy-intensive computer networks enable transactions in the cryptocurrency.

The People's Bank of China outlined the plan on Wednesday (Jan 3) at a closed-door meeting, according to the people, who asked not to be identified because it was not public. They did not detail how the authorities plan to enact the curbs.

Chinese officials are concerned that bitcoin miners are taking advantage of low power prices in some areas and affecting normal electricity use in some cases, the people said. Local officials have been asked to investigate the high consumption associated with the industry, they said. Some Chinese miners have set up around hydroelectric facilities in the provinces of Sichuan and Yunnan.

The curbs will also involve other regulators such as the National Development and Reform Commission, which oversees the power supply. The PBOC didn't immediately respond to a fax requesting comment sent after the close of regular business hours.

"This may have contributed to bitcoin coming off its daily highs and electricity usage certainly appears to be a significant challenge for the cryptocurrency in the years ahead," said Craig Erlam, senior market analyst at online trading firm Oanda in London.

Bitcoin, which surged 15-fold last year, pared gains on Wednesday and traded around US$15,086 on Thursday.

China is home to many of the world's largest bitcoin miners, who use massive computing power to verify transactions in the cryptocurrency. The global industry uses as much electricity as 3.4 million US homes, according to the Digiconomist Bitcoin Energy Consumption Index.

Beijing's scrutiny of miners follows a sweeping cryptocurrency crackdown last year. The authorities outlawed initial coin offerings in September and have called on local exchanges to halt virtual currency trading.