China Intensifies Hunt for Cryptocurrency Miners in Hiding

China’s campaign against the cryptocurrency industry is now targeting miners who tried to disguise themselves as data researchers and storage facilities to stay in business, according to people with knowledge of the situation.

Inspections intensified this month in several Chinese provinces, targeting illegal mining activities in colleges, research institutions and data centers, said the people who asked not to be named due to the sensitivity of the matter. Concern over the country’s power supplies for the upcoming winter season is one reason for the urgency, they said.

The new round of scrutiny could further depress the amount of crypto mining occurring in China, which for years had been the dominant player and as recently as April had a 46% share of the global hash rate, a measure of computing power used in mining and processing, according to the Cambridge Bitcoin Electricity Consumption Index.

Both Bitcoin’s price and the global hash rate tumbled after China cracked down on the industry earlier this year, though they’ve since recovered. And while plenty of miners fled the country, some had bet they could continue to thrive under the government’s oversight by shifting into lesser-known tokens and decentralized storage technologies.

The People’s Bank of China and the National Development Reform Commission didn’t respond to questions sent by fax.

A miner who asked to not be identified says his operations remain intact so far because he regularly switches to new facilities to house his equipment -- no more than 100 machines at one location -- so it’s more difficult for regulators to spot irregular power usage surges.

In the northern province of Hebei, which accounts for a small share of the industry, local agencies required companies and institutions to avoid cryptocurrency mining with their computing systems, and asked for a self-compliance check before September 30, according to a statement released on Wednesday.

A massive expansion of crypto mining would “seriously affect economic and social development and directly threaten national security,” the local Internet regulator said in the statement, adding that the power consumption involved in mining isn’t in line with the country’s emissions-cutting policy. Cryptocurrency trading disrupts financial order, the statement added.

The government will start a mechanism to monitor and follow computing activities regularly in October, it said. Officials responsible for the data systems where irregular mining is found will be punished, and related Internet connections will be cut off, it added.

On Wednesday, the government in the coal-rich Inner Mongolia region said it hired a contractor to study how to root out crypto mining.