A state-owned electric utility in China is rebuffing rumors that bitcoin mining has been deemed illegal by the government.

Rumors spread in the past day – based on a circulated document – indicating that the country's State Grid was moving to ban bitcoin mining at a county level in Sichuan province, an ostensibly notable development given the area's abundant water supply for electricity generation and the fact that profit-chasing bitcoin miners are headquartered in the region.

A translated version of the document states that "bitcoin mining is an illegal activity," further adding that "each State Grid connected generator that is involved in powering bitcoin mining is also regarded as an illegal practice, which shall be prohibited." The document includes the official stamp of the State Grid's Dan Ba county branch, located in Sichuan.

Though quickly circulated and reported by Chinese local media – raising questions about whether such a decision may signal an administration move against bitcoin mining (one that would follow crackdowns on initial coin offerings (ICOs) and the exchange-based trading of cryptocurrencies against the Chinese yuan) – subsequent statements indicate that the fears may be overblown.

According to Chinese business publication Caixin, local executives from the county branch confirmed the authenticity of the report but clarified it's only an internal memo and some of the phrases were drafted incorrectly. It's also important to note that the document comes from a county branch instead of a statewide level, thus diminishing the weight it might carry.

"We are a state-owned enterprise, not an administrative branch that has the power to determine whether bitcoin mining is legitimate or not," the county branch told the publication.

The firm went on to clarify that some of the small generators in the region may have violated agreements that prioritize electrical supplies for local residents before business such as bitcoin mines.

At the same time, such a decision may also signal a conflict between the State Grid’s county branch and the individual generators over the profits that they make through bitcoin mining.

“It’s a fight for the interests of hydropower stations,” Jiang Zhuoer, founder of China’s mining pool BTC.TOP, told CoinDesk.

Hydropower image via Shutterstock