Canaan provides update on bitcoin mining operation challenges

Canaan announced that the challenges set forth below may adversely impact the company’s bitcoin generation and revenue from its mining activities, primarily due to reduced uptime, beginning in Q3. Regarding Kazakhstan regulatory changes, to ensure legal compliance, the company decided to temporarily shut down approximately 2.0 Exahash/s of its mining computing power in Kazakhstan since July 2023, after the Rules for Licensing of Digital Mining Activities became effective in Kazakhstan in April. The company must wait for one of its local partners to obtain its Type I license for mining infrastructure possessors before the company can complete its license application. The company now anticipates a continued suspension of its mining operations in Kazakhstan into Q3, resulting in an expected reduction in bitcoin generation. The computing power shutdown consists of approximately 50% of the company’s total installed computing power in Central Asia and North America, which totaled 4.0 Exahash/s at the end of Q1. The company has been building out its global mining operations outside Kazakhstan and exploring avenues to sustain collaboration with local miners by adjusting present cooperation arrangements to align with both the Law and the Rules. Regarding the dispute relating to joint mining activities in the U.S., on August 3, Canaan U.S. participated in a mediation with a partner that provides hosting and management services for cryptocurrency mining machines, after the partner breached the parties’ Joint Mining Agreement at a U.S.-based mining farm. Canaan US seeks to recover for, among other things: the partner’s failure to install 13,000 of Canaan US’s cryptocurrency mining machines; ) the partner’s failure to refund Canaan US’s $1.25M deposit; the partner’s failure to cause the continued operation of another 13,000 cryptocurrency mining machines that were installed, which have yet to be returned; the partner’s failure to pay Canaan US a substantial amount of the Bitcoin profits; the partner, in violation of the agreement, attempted to impose substantial off-contractual operating fees on Canaan. Because no settlement was reached at the mediation, Canaan US intends to file an arbitration demand and proceed to arbitrate the parties’ dispute.