Bitcoin tumbled more than 10 per cent Monday after China broadened a crackdown on its massive cryptocurrency mining industry with a ban on mines in a key southwestern province.

Chinese mines power nearly 80 percent of the global trade in cryptocurrencies despite a domestic trading ban since 2017, but in recent months several provinces have ordered mines to close as Beijing turns a sharp eye to the industry.

Authorities in the province of Sichuan ordered the closure of 26 mines last week, according to a notice widely circulated on Chinese social media and confirmed by a former bitcoin miner.

The price of bitcoin sank to as low as $32,309. The unit has taken a severe hit in recent weeks, having hit a record near $65,000 in April, partly because of Beijing's crackdown.

The notice reportedly instructed power companies to stop supplying electricity to all cryptocurrency mines by Sunday.

It vowed a "complete clean-up" and ordered local governments to carry out a "dragnet-style investigation" to find and shut down suspected crypto mines.

The province represents one of the largest bases for mining in the country.

A former cryptocurrency miner told AFP they had "closed everything" in line with the requirements in recent days.

"There have been working groups coming to check... making sure we shut down operations and removed the machines," he said.

Sichuan, a mountainous region in southwest China, is home to a large number of cryptocurrency mines, which require a colossal amount of energy supplied by the province's cheap and abundant hydropower.

According to a report in the state tabloid the Global Times, the closure of mines in the province has resulted in the shutting down of more than 90 percent of the country's bitcoin mining capacity.

On Monday, China's central bank added that it recently summoned banks and payment institutions -- including the Industrial and Commercial Bank of China, Agricultural Bank of China and AliPay (China) Internet Technology -- over providing services for virtual currency transactions and speculation.

The People's Bank of China said virtual currency transaction activities "disrupt the normal economic and financial order and breed risks of illegal cross-border asset transfers", adding that institutions must cut off links facilitating them.

Beijing has turned the screw on cryptocurrency miners to stamp out financial risks from speculation, although environmental concerns about the gas-guzzling mines is also a factor.

Chinese media reported that electricity supply to all crypto mines across the province was stopped at midnight Sunday, as the topic trended on social media.

Sichuan is China's second most intensive mining region after Xinjiang in the country's northwest, according to Cambridge University's Bitcoin Electricity Consumption Index.

All crypto mines in the sparsely populated but coal- and hydropower-rich regions of Inner Mongolia and Qinghai were also ordered to shut down in recent months, with citizens encouraged to report illegal mines.

Last month, the value of bitcoin dived after three Chinese financial industry bodies reasserted a ban on financial institutions from offering cryptocurrency services, warning against risky speculation by traders.

China is in the midst of a wide-ranging regulatory crackdown on its fintech sector, whose biggest players -- including Alibaba and Tencent -- have been hit with big fines after being found guilty of monopolistic practices.

Why China is getting tough on crypto
Beijing (AFP) June 21, 2021 - Cryptocurrency prices have fluctuated wildly in recent weeks as China intensifies a crackdown on trading and mining operations.

On Monday bitcoin slumped more than 10 percent after Beijing pulled the plug on the massive mines of Sichuan province.

China's regulatory assault on the digital currency has crypto watchers reaching for answers as to why Beijing is clamping down now and what it means for the market.

- Why the crypto crackdown? -

Beijing craves control, with the financial system now increasingly in its sights.

Bitcoin, the world's largest digital currency, and other cryptos cannot be traced by a country's central bank, making them difficult to regulate.

Chinese authorities outlawed trading this month to "prevent and control financial risks".

Analysts say China fears the proliferation of illicit investments and fundraising -- it also has strict rules around the outflow of capital.

Crypto transactions threaten these controls.

"China does not have an open capital account and cryptocurrencies circumvent this which is an anathema to China's authorities," Jeffrey Halley, Asia Pacific analyst at Foreign Exchange trading firm Oanda, told AFP.

But the crypto crackdown also opens the gates for China to introduce its own digital currency, already in the pipeline, allowing the central government to monitor transactions.

While crypto creation and trading have been illegal in China since 2019, Beijing's latest moves have led to its vast network of bitcoin miners shutting up shop.

- What makes China important? -

China's electricity-guzzling bitcoin data centres power nearly 80 percent of the global cryptocurrency trade.

Access to cheap power and hardware has allowed Chinese companies to process the vast majority of crypto transactions and generate the tedious hexadecimal numbers needed to mint new currency.

China relies on a particularly polluting type of coal, lignite, to power some of its mining and Bloomberg predicts it will not be able to meet its cryptocurrency industry's needs through renewable energy until 2060.

Crypto-mining is expected to use 0.6 percent of the world's total electricity production in 2021 -- more than the annual consumption of Norway -- according to Cambridge University's Bitcoin Electricity Consumption Index.

Chinese restrictions may in part be triggered by the fact that crypto's enormous power demands have led to a surge in illicit coal extraction, posing a serious risk to Beijing's ambitious climate goals.

Several provinces have ordered mines to close as the central government plays whack-a-mole with the shadowy sector.

Authorities in the province of Sichuan ordered the closure of 26 mines last week and told power companies not to supply electricity to the energy-guzzling facilities.

The hit on one of the largest mining provinces tanked the price of bitcoin to $32,309.

- What are China's digital currency plans? -

China launched tests for a digital yuan in March. Its aim is to allow Beijing to conduct transactions in its own currency around the world, reducing dependency on the dollar which remains dominant internationally.

"It is about making the yuan more internationally available whilst maintaining complete control," analyst Halley said.

But while countries race to get their own digital currencies in a market-leading position, experts say state-sanctioned digital money will not dampen the wider appeal of crypto as a safe place far from the reaches of governments.

"Bitcoin only marginally competes as a payment system," Leonhard Weese, Co-founder at The Bitcoin Association of Hong Kong said.

"At the moment, its main appeal is that it cannot easily be seized, censored and debased."

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