The current crackdown is in line with China’s new policy to alleviate speculative investment in cryptocurrencies as the establishment seeks to establish its own national Renminbi digital currency.
Crypto Mining Problems
Prior to the crackdown, China was a world leader in the crypto mining sector. Over half of Bitcoin’s mining hashrate could be traced back to Chinese miners who had started major mining farms in provinces such as Yunnan, Xinjiang, and Sichuan, which had an abundance of cheap electricity.
The emergent environmental costs, however, caused concern among green investors and environmentalists. This is because roughly two-thirds of China’s electricity is derived from coal.
Moreover, the trend was causing a surge in illegal coal extractions that endangered the lives of coal miners. In April, dozens of mine workers got trapped after an unregulated facility got flooded. The incident sparked debate on the dangers of courting crypto mining ventures and instigated a shutdown.
What the US has to Offer
It is estimated that over half a million Chinese crypto mining rigs will be transferred to the US over the next year due to the changing miner landscape. The situation could ultimately lead to the US becoming the top mining destination. Analysts contend that the US will have the capacity to contribute over 40 percent of the bitcoin mining hashrate by the end of next year.
The US offers numerous benefits to Chinese miners. It is, firstly, a politically stable region where democracy permeates to the lowest levels of government. This allows crypto mining companies to make semi-permanent deals with federal authorities. In regions where crypto mining operations are encouraged, mining companies would also benefit from favorable tax incentives.
Additionally, some US regions have deregulated power. Texas, for example, has a deregulated power grid that allows consumers to choose from a range of providers. The setup makes low-tariff contracts with power providers easier to execute.
Another convenience of setting up a base in the US is that there is a wide variety of electricity generation sources to choose from. To stay within emission regulations, mining firms can choose to get their electricity from biomass, hydropower, wind, and geothermal power plants.
Besides the United States, Russia, Kazakhstan, Iran, and Canada are also taking in mining projects fleeing the PRC offensive.