SINGAPORE, Aug. 18,
2023 /PRNewswire/ -- Canaan Inc. (NASDAQ: CAN)
("Canaan" or the "Company" or "We"), a leading high-performance
computing solutions provider, today 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 the third
quarter of 2023.
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, subsequently to the Rules for
Licensing of Digital Mining Activities (the "Rules") became
effective in Kazakhstan.
The Rules were released by The Ministry of Digital Development,
Innovations and Aerospace Industry of the Republic of Kazakhstan to implement Law No. 193-VII on
Digital Assets in the Republic of Kazakhstan (the "Law"), which came into effect
in April and set a legal framework for governing the mining of
cryptocurrency within the country. Under the Law and
Rules, persons engaged in the mining of
cryptocurrencies must first obtain a specialized
license.
With a hope to resume mining operations upon receipt of
approval, the Company has been working actively to obtain a Type II
license for mining hardware owners since early July. However, it
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. This local partner
has applied for a license but its application remains pending. The
Company now anticipates a continued suspension of its mining
operations in Kazakhstan into the
third quarter of 2023, 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 the first quarter of 2023.
The Company has been monitoring potential policy changes and
their impact in Kazakhstan as
early as 2021. As mentioned in the Company's third quarter of 2021
earnings call, the Company was hopeful that Kazakhstan's then-forthcoming regulations on
cryptocurrency mining would bring about a period of
sustainable cryptocurrency development in the country.
At the same time, to better manage its geographic exposure, the
Company has been building out its global mining operations outside
Kazakhstan.
The Company and its local mining partners are actively pursuing
the necessary licenses. While the Company remains optimistic about
being able to obtain such licenses and continue its Kazakhstan mining operations in the future, as
of now, it has yet to receive said license. We are also exploring
avenues to sustain our collaboration with local miners by adjusting
our present cooperation arrangements to align with both the Law and
the Rules.
Dispute Relating to Joint Mining Activities in the
U.S.
On August 3, 2023, Canaan U.S.
Inc., an operating subsidiary of the Company ("Canaan US"),
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 (the "Agreement") at a U.S.-based mining farm. Per the
Agreement, mediation was mandatory before the parties can proceed
to arbitration. Canaan US seeks to recover for, among other things:
(i) the partner's failure to install 13,000 of Canaan US's
cryptocurrency mining machines, of which we have also
discovered that a small number were returned damaged; (ii) the
partner's failure to refund Canaan US's $1.25 million deposit; (iii) 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; (iv) the partner's failure to pay
Canaan US a substantial amount of the Bitcoin profits;
(v) the partner, in violation of the agreement, attempted to impose
substantial off-contractual operating fees on Canaan US; and (vi)
the partner's failure to cause the selection of a mining pool
provider satisfactory to Canaan US and to seek Canaan US's consent
as to the selection of the mining pool provider. Because no
settlement was reached at the mediation, Canaan US intends to file
an arbitration demand and proceed to arbitrate the parties'
dispute.
The challenges outlined above are anticipated to substantially
affect the Company's operational mining computing power starting in
the third quarter of 2023. We recognize that operating in a dynamic
market environment comes with its share of uncertainties.
Navigating the complex landscape of varied legal frameworks across
countries, coupled with unpredictability stemming from
collaborating with partners in an evolving market, underscores the
inherent operational challenges we aim to address. Such risks are
indeed at the forefront of our operational strategy, which we are
actively working to improve so that we may proactively solve and
manage these challenges.
About Canaan Inc.
Established in 2013, Canaan Inc. (NASDAQ: CAN), is a technology
company focusing on ASIC high-performance computing
chip design, chip research and development, computing equipment
production, and software services. Canaan's vision is "super
computing is what we do, social enrichment is why we do it." Canaan
has extensive experience in chip design and streamlined production
in the ASIC field. In 2013, under the leadership of
Mr. Nangeng Zhang, founder and CEO, Canaan's founding team shipped
to its customers the world's first batch of mining machines
incorporating ASIC technology in
Bitcoin's history under the brand name, Avalon. In
2018, Canaan released the world's first RISC-V architecture
commercial edge AI chip. In 2019, Canaan completed its initial
public offering on the Nasdaq Global Market. To learn more about
Canaan, please visit https://www.canaan.io/.
Safe Harbor Statement
This announcement contains forward−looking statements. These
statements are made under the "safe harbor" provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward−looking statements can be identified by terminology such as
"will," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates" and similar statements. Among other things,
the business outlook in this announcement, as well as Canaan Inc.'s
strategic and operational plans, contain forward−looking
statements. Canaan Inc. may also make written or oral
forward−looking statements in its periodic reports to the U.S.
Securities and Exchange Commission ("SEC") on Forms 20−F and 6−K,
in its annual report to shareholders, in press releases and other
written materials and in oral statements made by its officers,
directors or employees to third parties. Statements that are not
historical facts, including statements about Canaan Inc.'s beliefs
and expectations, are forward−looking statements. Forward−looking
statements involve inherent risks and uncertainties. A number of
factors could cause actual results to differ materially from those
contained in any forward−looking statement, including but not
limited to the following: the Company's goals and strategies; the
Company's future business development, financial condition and
results of operations; the expected growth of the
Bitcoin industry and the price of
Bitcoin; the Company's expectations regarding demand
for and market acceptance of its products, especially its
Bitcoin mining machines; the Company's expectations
regarding maintaining and strengthening its relationships with
production partners and customers; the Company's investment plans
and strategies, fluctuations in the Company's quarterly operating
results; competition in its industry; and relevant government
policies and regulations relating to the Company and
cryptocurrency. Further information regarding these
and other risks is included in the Company's filings with the SEC.
All information provided in this press release and in the
attachments is as of the date of this press release, and Canaan
Inc. does not undertake any obligation to update any
forward−looking statement, except as required under applicable
law.
Investor Relations Contact:
Canaan Inc.
Ms. Xi Zhang
Email: IR@canaan-creative.com
ICR, LLC.
Robin Yang
Tel: +1 (347) 396-3281
Email: canaan.ir@icrinc.com
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SOURCE Canaan Inc.