Author: Lawyer Liu Zhengyao

Introduction

On February 4, 2026, coinciding with the beginning of spring, a notice titled "Notice on Prohibiting Virtual Currency 'Mining' Activities" was issued by Butuo County in the Liangshan Yi Autonomous Prefecture of Sichuan Province (hereinafter referred to as the "Notice"). This caused a slight ripple in the domestic crypto community. Although not many people paid attention to this matter, as a Web3 lawyer, Lawyer Liu believes the significance of this event is quite rich. For the general public, virtual currency may have become a distant "old news," but for regulators and the secretive practitioners of virtual currency mining in the country, this notice feels more like a precise "mine-clearing" operation.

At this point, nearly five years have passed since the joint announcement by multiple national ministries on September 3, 2021, to rectify "mining." The reaffirmation of the ban by Butuo County, located in the heart of Daliang Mountain, is not only a routine extension of the existing prohibition on mining but also exposes the stubborn existence of the "underground market" for virtual currency mining in the mainland.

01 Content of the Butuo County "Notice"

As you can see, the notice issued by Butuo County is brief, but the wording is quite severe and the direction is clear (for example, "relevant personnel will be held accountable for party discipline, administrative discipline, and legal discipline"), all of which reveals the local government's zero-tolerance attitude towards the resurgence of "mining."

Overall, the core content of the notice mainly covers three dimensions:

First, qualification and consequences. It clearly defines virtual currency "mining" as a backward production process that the state aims to eliminate, categorizing related activities as illegal financial activities. Participants face severe sanctions of "four cuts" (cutting off loans, electricity, internet, and credit), and public officials will also face accountability under party and administrative discipline.

Second, comprehensive prohibition. The notice explicitly bans all forms of mining activities, naming mainstream currencies such as Bitcoin and Ethereum, emphasizing that regardless of the "disguise" used, as long as the essence is the computational output of virtual currency, it is subject to strict crackdown.

Third, socialized supervision. A dual regulatory system of local and industry oversight is established, requiring electricity and telecommunications departments to conduct strict inspections. At the same time, the notice provides a reporting phone number and email, aiming to use "community prevention and control" to ensure that "mining machines" hidden in deep mountains, factories, or residential areas have nowhere to hide.

The reason Butuo County is making this statement in 2026 largely stems from its unique geographical environment. As a region rich in hydropower resources, it was once a safe haven for "miners." The issuance of the notice is a reaffirmation by the local government of the results of its "zeroing out" efforts.

02 Reviewing the "9.3 Notice": A Turning Point for China's Mining Industry

To understand the actions of Butuo County in Daliang Mountain, one must return to the autumn of 2021, a time that changed the fate of the crypto industry. On September 3, 2021, the National Development and Reform Commission and 11 other departments jointly issued the "Notice on Rectifying Virtual Currency 'Mining' Activities" (commonly referred to as the "9.3 Notice"). The significance of this document lies in:

(1) Comprehensive blockade.

It achieved a policy closed loop for prohibiting virtual currency mining, covering everything from investment access, energy supply, financial support to industry exit.

(2) Termination of industrial identity.

The "9.3 Notice" added "mining" to the "elimination category" in the "Guidance Catalog for Industrial Structure Adjustment," prohibiting new virtual currency mining projects and requiring existing mining activities to be gradually phased out, meaning "mining" has lost any legal industrial space in China.

(3) Strict prohibition of new projects and phasing out existing ones.

After the notice was issued, the large mining farms that had been spread across Xinjiang, Inner Mongolia, Sichuan, and Yunnan quickly closed, with a significant amount of computing power flowing overseas. From a regulatory perspective, the background of the "9.3 Notice" is not only an energy defense battle (to assist in carbon peak and carbon neutrality) but also a financial risk prevention battle. It officially announced the end of China's era as the "world computing power center" for virtual currency and ushered virtual currency in mainland China into a period of "illegality."

03 Beneath the Iceberg: The Existing Underground "Secret Market"

Since a comprehensive ban was already in place five years ago, why does Butuo County need to reiterate this now? The answer is simple: the underground market still exists and exhibits strong resilience and concealment.

In the past few years, virtual currency mining in the mainland has not completely disappeared; rather, it has shifted from "large factories" to "retail investors," from "above ground" to "deep underground." The manifestations have the following characteristics:

First is a "guerrilla warfare" style distribution. In remote mountainous areas rich in hydropower, such as Sichuan and Yunnan, some small hydropower stations, driven by profit, secretly supply power to small mining farms. The ban in Butuo County is a response to this, targeting these "guerrilla teams" hidden in ravines and farmhouses.

Second is the disguise of "high technology." Some enterprises, under the guise of "big data, cloud computing, supercomputing centers," exploit policy benefits to obtain electricity resources while secretly operating mining machines.

Finally, small-scale family operations. With advancements in noise reduction technology for mining machines, some individuals have placed a small number of mining machines in residential buildings, office buildings, and even student dormitories. This decentralized layout significantly increases regulatory costs.

This state of "wildfires cannot be extinguished" is the fundamental reason why regulatory authorities continue to issue reiterative policies. The notice from Butuo County reflects that regulatory efforts in the mainland have entered a new phase of "regular inspections" and "targeted eliminations."

04 What Legal Risks Exist for Domestic Virtual Currency Mining?

For those still harboring a fluke mentality as "lurkers," the current legal environment is no longer the "gray area" of the past but is filled with high-voltage lines. Friends involved in mining in the mainland may face the following risks:

(1) Criminal risks: From electricity theft to money laundering.

Many underground mining projects resort to illegal wiring, tampering with electricity meters, and other means to steal electricity to reduce costs or evade monitoring. According to China's Criminal Law, large-scale electricity theft constitutes theft and faces severe criminal penalties.

Some miners convert their mining profits through illegal platforms, which can easily involve money laundering chains. Once identified as assisting in money laundering or illegal financial transactions, the consequences can be dire. They may also face criminal risks such as concealing crimes.

(2) Administrative and civil risks: Losing everything.

First, confiscation of illegal gains and equipment. As stated in the Butuo County notice, once caught, all mining hardware (such as ASIC miners, graphics cards) and illegal gains (i.e., mined coins) will be confiscated according to the law. Given the high prices of equipment, this means investors' assets can instantly become worthless.

Second, civil law offers no protection. According to the "9.24 Notice" and judicial practice, civil legal actions involving investments in virtual currencies and related derivatives are invalid. This means that if you encounter issues such as partners absconding with funds or losses due to market factors in underground virtual currency mining, courts often do not accept such cases, and losses must be borne by the individuals themselves.

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