Canaan argues against China’s wholesale crackdown on bitcoin mining

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, 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.

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.

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, 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.

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