China: Veteran Regulator Tells Sichuan to Tap Hydropower for Blockchain

A veteran Chinese regulator has told those tasked with steering the strategic development of Sichuan province to tap surplus hydropower for the blockchain industry.

Jiang Yang —  former vice-chairman of the China Securities Regulatory Commission — advised strategists that:

“Sichuan should study further about how the province’s cheap hydropower resources can attract digital currency-related businesses.”  

Yang’s remarks were noted in an Oct. 30 report from South China Morning Post.

Use cryptocurrency mining to absorb excess output

Sichuan, located in south-western China, has a protracted rainy season and is thus the country’s biggest producer of hydropower. 

In 2018 alone, the province generated 78.2 gigawatts — that’s 78.2 million kilowatts — of power and exported 104 billion kilowatt-hours (kWh), 30% of its total output, to other regions.

With this abundant resource, Sichuan’s electricity tariffs are reportedly as low as 2 US cents per kWh during the rainy season — as compared with the 11 US cent rate reported in Guangzhou and Beijing. 

Even outside of the season, costs remain at a modest 4 US cents per kWh — a major draw for cryptocurrency miners, for whom electricity consumption commands the lion’s share of operating costs. 

Most crucially, cryptocurrency mining is thought to have the potential to help absorb excess energy output, which reportedly remains a missed export opportunity for hydropower plants lacking in infrastructure. This could significantly boost the local economy, SCMP notes.

Calls for a breakthrough in blockchain finance

Jiang told strategists that China continues to mine 70% of the world’s Bitcoin (BTC), followed by India (4%) and the United States (1%), citing cheap hydropower as a major driving factor. 

He called for China to seek a breakthrough in the application of blockchain to finance, noting that:

“In finance, the application of blockchain technology has been through digital currency, which today is primarily driven by Bitcoin.”

Leon Liu — CEO of retail crypto trading platform Bitkan — told reporters that since President Xi’s high-profile endorsement of blockchain development last week, the volume of Bitcoin traded on the platform has surged by four times.

Increased mining is also expected to trigger a major uptick in Bitcoin trading volumes, as miners cash out their rewards to pay for operating costs. 

This could represent a fraught issue for China’s main macroeconomic planning agency, the National Development Reform Commission, which has endeavored to clamp down on Bitcoin mining. 

China has, moreover, banned all domestic crypto exchanges since Sept. 2017, meaning that this trading is likely to occur on offshore platforms.

Yesterday, Cointelegraph reported that the People’s Bank of China and the country’s market regulator will jointly implement a new system to certify 11 types of fintech hardware and software products relating to digital payments.