Chinese police crack down on bitcoin miners over $3m of stolen electricity – The Guardian

Police in eastern China have cracked down on a ring of illicit bitcoin miners who stole nearly $3m (£2.4m) worth of electricity to generate the digital currency, prompting a local power company to tip off investigators, authorities said.

Police in Zhenjiang, in eastern Jiangsu province, said officers confiscated almost 4,000 mining devices from an illicit bitcoin operation that stole nearly 20m yuan in power.

“In value, it is the largest case in the amount of electricity stolen that Jiangsu has cracked since the founding of new China, and a rare sight in the whole country,” Zhenjiang police said in an online statement.

The authorities said they were originally tipped off by a local power company, which reported abnormal electricity usage.

Police have taken “compulsory measures” against more than 20 criminal suspects, and the case is under investigation.

Q&A

What is cryptocurrency?

Cryptocurrencies are an alternative way of making payments to cash or credit cards. The technology behind it allows the ‘money’ to be sent directly to others without it having to pass through the banking system. For that reason they are outside the control of governments and are unregulated by financial watchdogs – and transactions can be made in a way that keeps you reasonably pseudonymous.

If you own a crypto-asset you control a secret digital key that you can use to prove to anyone on the network that a certain amount of that asset is yours. If you spend it, you tell the entire network that you have transferred ownership of it, and use the same key to prove that you are telling the truth. Over time, the history of all those transactions becomes a lasting record of who owns what: that record is called the blockchain.

Bitcoin was one of the first and biggest cryptocurrencies and has been on a wild ride since its creation in 2009, surging in value as investors piled in, drawing comparisons with the tulipmania of the 17th century before it crashed. Sceptics warn that the lack of central control make crypto-assets ideal for criminals and terrorists. 

The number of crypto-assets has grown rapidly, including from several major companies. JP Morgan has built its own cryptocurrencies, while trading in traditional financial assets that track the value of cryptocurrencies – such as derivatives and contracts for difference – has also become available. Facebook is planning to launch its own digital currency – Libra – in 2020.

Richard Partington and Martin Belam

Bitcoin is a decentralised virtual currency that can be produced or “mined” by banks of computers solving complex algorithms. The mining process can be very expensive on a large scale because it requires cutting-edge technology and vast amounts of electricity.

The value of bitcoin has surged above $11,000 (£8,760), after Facebook unveiled last month its own global cryptocurrency called Libra, due to launch next year.

Unlike a traditional currency such as the dollar, the euro or the yen, bitcoin has no central bank and is not backed by any government. Instead, the unit is controlled and regulated by its community of users, who argue that this makes it more efficient than traditional currencies.

Though China’s digital payments ecosystem has developed faster than most of the world and mobile payments dominate everyday transactions in urban centres, the country’s central bank has adopted a cautious attitude towards cryptocurrencies.

In 2017, Beijing cracked down on cryptocurrency trading by shutting down bitcoin exchanges. It also banned initial coin offerings, a way for companies to raise funds.

According to several studies, cryptocurrency mining consumes more energy per year than many countries – with more than half of mining farms located in China.

Besides electricity theft, other bitcoin-related crimes include hacking cryptocurrency owners.

Last August, Chinese police in the northern city of Xi’an arrested three suspects who had allegedly stolen assets worth 600m yuan by hacking the computers of victims who owned bitcoin and other virtual currencies.