Canaan, a Singapore-based computing solutions provider, is currently grappling with regulatory changes in Kazakhstan and a dispute over its mining operations in the U.S. These issues are expected to have an impact on the company’s ability to generate bitcoin and revenue.
Regulatory Changes in Kazakhstan
In July 2023, Canaan was forced to shut down some of its mining computing power in Kazakhstan due to new rules for licensing digital mining activities. The company is actively working to obtain a license for mining in the country, but it is currently dependent on a local partner who needs to obtain a license first. As a result, operations in Kazakhstan are expected to remain suspended into the third quarter, leading to a reduction in bitcoin generation. The shut-down computing power represents approximately half of Canaan’s total installed computing power in Central Asia and North America.
Dispute Over U.S. Mining Operations
Canaan’s U.S. business is currently involved in mediation over an alleged breach of contract with a partner who provides hosting and management services for cryptocurrency mining machines. The mediation process is a necessary step for Canaan to proceed to arbitration, where the company seeks to recover damages. Specifically, Canaan aims to address the partner’s failure to install 13,000 cryptocurrency mining machines, refund a $1.25 million deposit, maintain operations for 13,000 other machines that were installed and still haven’t been returned, and compensate Canaan for a significant amount of Bitcoin profits. Moreover, Canaan alleges that the partner attempted to impose high off-contract operating fees and failed to find a satisfactory mining pool provider for Canaan’s U.S. operations.
The ongoing dispute is anticipated to impact Canaan’s mining computing power in the third quarter.
Canaan acknowledges the challenges that arise from operating in a dynamic market environment. However, the company remains committed to finding solutions and mitigating the effects of these hurdles.
Shares of Canaan fell by 13% to $2.04 in premarket trading.