Crypto miners got kicked out of China. Now they're sucking America dry.
Anson Chan for BI
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Sep 10, 2024
China used to be the crypto capital of the world. Thanks to the cheap energy and friendly regulations, mining companies flocked to set up shop in a country reluctantly playing host to the energy-intensive process of creating coins and validating transactions. In 2019, despite some regulation and a ban on initial coin offerings years prior, China's leader, Xi Jinping, called for widespread implementation of blockchain technology to support the country's quest for secure and reliable data systems, boosting blockchain research and further propelling China ahead of the US. At its peak, in 2021, the country accounted for almost 70% of global cryptocurrency mining.
But in May of that year, China changed course. Concerns about the use of cryptocurrencies for illegal activity resulted in an effective ban on crypto mining and transactions. Zongyuan Zoe Liu, a senior fellow at the Council on Foreign Relations, told me the ban stemmed from the risk that cryptocurrencies posed to China's financial system through activities like money laundering. This sent the industry spiraling.
Mining companies immediately fled the country, many moving to nearby Kazakhstan, where there was an abundance of coal power. Since minting bitcoins requires solving increasingly complex math problems, the hundreds of specialized machines used in the process — along with the equipment to cool them — take a massive amount of electricity. According to the Cambridge Bitcoin Electricity Consumption Index, Kazakhstan went from accounting for 7% of the global "hashrate" — the computational power required to make new bitcoins — in May 2021 to almost 20% just three months later. The influx of crypto miners began sucking up 7% of the country's generated energy, sending the price of fuel soaring and creating widespread power outages. After a massive public outcry at the end of 2021, mining companies in Kazakhstan were effectively cut off from the grid.
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So then they came to America. Today, the US makes up about 40% of the global hashrate — up from 17% during China's 2021 peak — making America the biggest hub for bitcoin mining. The country's 52 cryptocurrency-mining operations use about 2% of America's energy — enough to power the entire state of Utah or West Virginia. While it hasn't caused the kind of crisis that took place in Kazakhstan, the massive energy consumption has still prompted pushback from locals and heightened concerns about Chinese-owned operations moving in. And it's just the latest example of China kicking out burdensome industries only for them to end up on America's doorstep.
Among the major Chinese-owned crypto-mining companies that migrated to America was Bit Mining. In May 2021, the company had the largest data center and crypto-mining facility in the world, in China. By that September, after a brief stint in Kazakhstan, it was setting up shop in Akron, Ohio, in a building once owned by the tire giant Goodyear. Other bitcoin-mining companies settled in rural regions in the US with affordable electricity, favorable regulations, and ample warehouse space. But the noisy facilities, which typically employ only a few dozen people, haven't formed the rosiest relations with neighbors.
"The amount of energy these companies use is staggering," Jeremy Fisher, a senior strategy advisor with the Sierra Club's Environmental Law Program, told me. In Rockdale, Texas, for example, a Riot Platforms mining facility uses 450 megawatts of energy — the equivalent of what's needed to power roughly 300,000 homes. Electricity is also becoming an increasingly pressing issue in the climate crisis. Power outages nationwide have increased 64% since the early 2000s, and weather-related outages have increased 78%.
"At a moment when we need to be rapidly increasing the amount of renewable generation and shutting down fossil-fuel plants, proof-of-work cryptocurrency is pushing the wrong direction," Fisher said.
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Resistance to bitcoin mining has manifested largely at the local level. Frustrated locals in Murphy, North Carolina, Massillon, Ohio, and other places are signing petitions, forming coalitions, and creating YouTube channels to fight back against the mines in their towns. Gladys Anderson, who lives next to a mining facility in Bono, Arkansas, spoke about her experience at a town-council meeting for a proposed facility in Vilonia, Arkansas, last summer. "It's caused a lot of headaches," she said. Her son, who has autism, struggles to deal with the loud noise. "My son is currently in the backyard having a meltdown," she said.
At a moment when we need to be rapidly increasing the amount of renewable generation and shutting down fossil-fuel plants, proof-of-work cryptocurrency is pushing the wrong direction.
The Bit Mining facility in Akron has also faced pushback. "They're going to be using a lot of water, and electricity rates tend to go up for that sort of thing," Kelley Sayre, a resident there, said. A New York Times analysis found that the energy used by the Akron facility translated to 705,000 tons of CO2 emissions a year (roughly equal to the annual amount of emissions from two gas-fired power plants). Bit Mining didn't respond to a request for comment.
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The mayor's office of Akron isn't excited about the mine, either. "The bitcoin mining industry as a whole runs counter to this administration's values and policy goals," Stephanie Marsh, the director of communications for the city of Akron, said in a statement. "Digital mining operations consume an exorbitant amount of electricity, employ very few individuals, and take up a considerable amount of space." Marsh told me the city would prefer the space to be occupied by a company that could provide hundreds of jobs and contribute to the local economy. It's not clear what benefits the city gets from the Bit Mining facility.
Countering local pushback is a powerful, ascendent new force: the bitcoin lobby. Tech companies and bitcoin investors are already having an impact on legislation in states like California, where, last September, Gov. Gavin Newsom vetoed a bill that would've established a licensing and regulatory framework for "digital financial assets." His veto came after the crypto industry spent over $400,000 on lobbying efforts. That influence has grown to a federal level, too. Bitcoin lobbyists spent more than $20 million to ensure that Congress would block federal oversight of cryptocurrencies by the Securities and Exchange Commission, which it did in May.
"Bitcoin stands for freedom, sovereignty, and independence from government coercion and control," former President Donald Trump told crypto enthusiasts at July's Bitcoin Conference in Nashville, reversing his previous opposition to the coin, which he called a scam during his presidency. To thunderous applause, Trump promised to fire the chair of the SEC and position America as the "crypto capital of the planet." In response, crypto investors and super PACs dumped millions into Trump's campaign.
In 2008, bitcoin's inventor, Satoshi Nakamoto, whose identity remains unknown, described the coin as "very attractive to the libertarian viewpoint." The supposed decentralized nature of the blockchain has attracted supporters who believe in free-market economics and techno-utopianism. Crypto enthusiasts dream of a world where financial institutions are replaced by decentralized cryptocurrencies, money that they say is inflation-proof.
However, in recent years, bitcoin mining has become increasingly concentrated in the hands of a small number of private companies. In 2021, the National Bureau of Economic Research found that 10% of miners controlled 90% of the bitcoin-mining capacity. "The concentration of currency holding, processing power, and programming skills in the hands of one group of people who are effectively partners in a venture defeats the entire purpose of employing a blockchain structure," the economist Saifedean Ammous wrote in his book "The Bitcoin Standard."
As it grows, the people who own this concentrated industry are becoming of particular interest to politicians concerned about the new Cold War with China.
At a packed City Council meeting in Massillon in March, many residents raised concerns about the proposed Bitdeer Inc. crypto-mining facility. The company owns mining facilities across the world and is listed on the Nasdaq; the proposed facility in Ohio would be made up of 30 buildings on 31 acres of land and employ 70 people. Cheyanne Diehl, a 29-year-old Massillon resident, said she wasn't just concerned about energy usage and noise but also had qualms with the company's country of origin. "Some of these questions you guys might not be able to answer, but I did want to know if there are any factors that might motivate a small American town to consider the construction of a bitcoin facility particularly when the facility's owner is a Chinese billionaire," she said. In April, Massillon's City Council ultimately voted 8-1 to move ahead with the facility in hopes of stimulating the economy. It's set to be constructed by next summer.
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Across the economy, China seems to always be one step ahead of America.
In Arkansas, the backlash was so severe that the state reversed course on its laws allowing crypto mining and passed regulations this year addressing noise reduction, proximity to residential areas, and foreign ownership.
The surge in cryptocurrency-mining operations owned by investors from China has prompted the Biden administration to keep a close eye on the industry. In May, President Joe Biden ordered a mining company that is majority-owned by Chinese investors to sell its facilities close to a nuclear-missile base in Wyoming, arguing it posed a security risk. A spokesperson for the Chinese Embassy in Washington, Liu Pengyu, claimed that this kind of "politicization" of free trade undermined "international confidence in the US market environment."
It's yet another touchstone amid the wider economic tension between the US and China. Across the economy, China seems to always be one step ahead of America. When China banned plastic imports, the US suddenly had to deal with its own plastic waste. When China ramped up making computer chips, America rushed to catch up. And when China put cheap electric vehicles on the market, the US quickly imposed heavy tariffs to avoid hurting the domestic EV market. Now, Chinese-owned mines are sucking the energy out of the US.
For Fisher of the Sierra Club, the solution is multifaceted. He said it's important to have transparency and ensure regular electricity ratepayers aren't subsidizing bitcoin-mining facilities. "Right now, it's profitable to mine cryptocurrency at electricity costs that put steel mills out of business," he said. "We might need to implement fees to ensure that the grid stays affordable for ratepayers and industries." His final recommendation is an ambitious one: a moratorium on new mining facilities.
Fisher isn't alone in calling for a pause on building new facilities. Harrison, Arkansas' City Council, for example, enforced a multimonth moratorium on a Green Digital facility after witnessing citywide opposition to the project. It ultimately greenlighted the project, but it showed that a city council was capable of enforcing a moratorium.
Given how much energy bitcoin mining consumes, it's worth questioning whether its presence in the US is really worth the trade-off. The bitcoin lobby's rosy vision for the future has so far been confined to the realm of utopianism and, if left unchecked, could accelerate a climate dystopia for us all.
Taylor Dorrell is a writer and photographer based in Columbus, Ohio.
China used to be the crypto capital of the world. Thanks to the cheap energy and friendly regulations, mining companies flocked to set up shop in a country reluctantly playing host to the energy-intensive process of creating coins and validating transactions. In 2019, despite some regulation and a ban on initial coin offerings years prior, China's leader, Xi Jinping, called for widespread implementation of blockchain technology to support the country's quest for secure and reliable data systems, boosting blockchain research and further propelling China ahead of the US. At its peak, in 2021, the country accounted for almost 70% of global cryptocurrency mining.
But in May of that year, China changed course. Concerns about the use of cryptocurrencies for illegal activity resulted in an effective ban on crypto mining and transactions. Zongyuan Zoe Liu, a senior fellow at the Council on Foreign Relations, told me the ban stemmed from the risk that cryptocurrencies posed to China's financial system through activities like money laundering. This sent the industry spiraling.
Mining companies immediately fled the country, many moving to nearby Kazakhstan, where there was an abundance of coal power. Since minting bitcoins requires solving increasingly complex math problems, the hundreds of specialized machines used in the process — along with the equipment to cool them — take a massive amount of electricity. According to the Cambridge Bitcoin Electricity Consumption Index, Kazakhstan went from accounting for 7% of the global "hashrate" — the computational power required to make new bitcoins — in May 2021 to almost 20% just three months later. The influx of crypto miners began sucking up 7% of the country's generated energy, sending the price of fuel soaring and creating widespread power outages. After a massive public outcry at the end of 2021, mining companies in Kazakhstan were effectively cut off from the grid.
Advertisement
So then they came to America. Today, the US makes up about 40% of the global hashrate — up from 17% during China's 2021 peak — making America the biggest hub for bitcoin mining. The country's 52 cryptocurrency-mining operations use about 2% of America's energy — enough to power the entire state of Utah or West Virginia. While it hasn't caused the kind of crisis that took place in Kazakhstan, the massive energy consumption has still prompted pushback from locals and heightened concerns about Chinese-owned operations moving in. And it's just the latest example of China kicking out burdensome industries only for them to end up on America's doorstep.
Among the major Chinese-owned crypto-mining companies that migrated to America was Bit Mining. In May 2021, the company had the largest data center and crypto-mining facility in the world, in China. By that September, after a brief stint in Kazakhstan, it was setting up shop in Akron, Ohio, in a building once owned by the tire giant Goodyear. Other bitcoin-mining companies settled in rural regions in the US with affordable electricity, favorable regulations, and ample warehouse space. But the noisy facilities, which typically employ only a few dozen people, haven't formed the rosiest relations with neighbors.
"The amount of energy these companies use is staggering," Jeremy Fisher, a senior strategy advisor with the Sierra Club's Environmental Law Program, told me. In Rockdale, Texas, for example, a Riot Platforms mining facility uses 450 megawatts of energy — the equivalent of what's needed to power roughly 300,000 homes. Electricity is also becoming an increasingly pressing issue in the climate crisis. Power outages nationwide have increased 64% since the early 2000s, and weather-related outages have increased 78%.
"At a moment when we need to be rapidly increasing the amount of renewable generation and shutting down fossil-fuel plants, proof-of-work cryptocurrency is pushing the wrong direction," Fisher said.
Advertisement
Resistance to bitcoin mining has manifested largely at the local level. Frustrated locals in Murphy, North Carolina, Massillon, Ohio, and other places are signing petitions, forming coalitions, and creating YouTube channels to fight back against the mines in their towns. Gladys Anderson, who lives next to a mining facility in Bono, Arkansas, spoke about her experience at a town-council meeting for a proposed facility in Vilonia, Arkansas, last summer. "It's caused a lot of headaches," she said. Her son, who has autism, struggles to deal with the loud noise. "My son is currently in the backyard having a meltdown," she said.
At a moment when we need to be rapidly increasing the amount of renewable generation and shutting down fossil-fuel plants, proof-of-work cryptocurrency is pushing the wrong direction.
The Bit Mining facility in Akron has also faced pushback. "They're going to be using a lot of water, and electricity rates tend to go up for that sort of thing," Kelley Sayre, a resident there, said. A New York Times analysis found that the energy used by the Akron facility translated to 705,000 tons of CO2 emissions a year (roughly equal to the annual amount of emissions from two gas-fired power plants). Bit Mining didn't respond to a request for comment.
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How private equity firms gobbled up higher education
The mayor's office of Akron isn't excited about the mine, either. "The bitcoin mining industry as a whole runs counter to this administration's values and policy goals," Stephanie Marsh, the director of communications for the city of Akron, said in a statement. "Digital mining operations consume an exorbitant amount of electricity, employ very few individuals, and take up a considerable amount of space." Marsh told me the city would prefer the space to be occupied by a company that could provide hundreds of jobs and contribute to the local economy. It's not clear what benefits the city gets from the Bit Mining facility.
Countering local pushback is a powerful, ascendent new force: the bitcoin lobby. Tech companies and bitcoin investors are already having an impact on legislation in states like California, where, last September, Gov. Gavin Newsom vetoed a bill that would've established a licensing and regulatory framework for "digital financial assets." His veto came after the crypto industry spent over $400,000 on lobbying efforts. That influence has grown to a federal level, too. Bitcoin lobbyists spent more than $20 million to ensure that Congress would block federal oversight of cryptocurrencies by the Securities and Exchange Commission, which it did in May.
"Bitcoin stands for freedom, sovereignty, and independence from government coercion and control," former President Donald Trump told crypto enthusiasts at July's Bitcoin Conference in Nashville, reversing his previous opposition to the coin, which he called a scam during his presidency. To thunderous applause, Trump promised to fire the chair of the SEC and position America as the "crypto capital of the planet." In response, crypto investors and super PACs dumped millions into Trump's campaign.
In 2008, bitcoin's inventor, Satoshi Nakamoto, whose identity remains unknown, described the coin as "very attractive to the libertarian viewpoint." The supposed decentralized nature of the blockchain has attracted supporters who believe in free-market economics and techno-utopianism. Crypto enthusiasts dream of a world where financial institutions are replaced by decentralized cryptocurrencies, money that they say is inflation-proof.
However, in recent years, bitcoin mining has become increasingly concentrated in the hands of a small number of private companies. In 2021, the National Bureau of Economic Research found that 10% of miners controlled 90% of the bitcoin-mining capacity. "The concentration of currency holding, processing power, and programming skills in the hands of one group of people who are effectively partners in a venture defeats the entire purpose of employing a blockchain structure," the economist Saifedean Ammous wrote in his book "The Bitcoin Standard."
As it grows, the people who own this concentrated industry are becoming of particular interest to politicians concerned about the new Cold War with China.
At a packed City Council meeting in Massillon in March, many residents raised concerns about the proposed Bitdeer Inc. crypto-mining facility. The company owns mining facilities across the world and is listed on the Nasdaq; the proposed facility in Ohio would be made up of 30 buildings on 31 acres of land and employ 70 people. Cheyanne Diehl, a 29-year-old Massillon resident, said she wasn't just concerned about energy usage and noise but also had qualms with the company's country of origin. "Some of these questions you guys might not be able to answer, but I did want to know if there are any factors that might motivate a small American town to consider the construction of a bitcoin facility particularly when the facility's owner is a Chinese billionaire," she said. In April, Massillon's City Council ultimately voted 8-1 to move ahead with the facility in hopes of stimulating the economy. It's set to be constructed by next summer.
Advertisement
Across the economy, China seems to always be one step ahead of America.
In Arkansas, the backlash was so severe that the state reversed course on its laws allowing crypto mining and passed regulations this year addressing noise reduction, proximity to residential areas, and foreign ownership.
The surge in cryptocurrency-mining operations owned by investors from China has prompted the Biden administration to keep a close eye on the industry. In May, President Joe Biden ordered a mining company that is majority-owned by Chinese investors to sell its facilities close to a nuclear-missile base in Wyoming, arguing it posed a security risk. A spokesperson for the Chinese Embassy in Washington, Liu Pengyu, claimed that this kind of "politicization" of free trade undermined "international confidence in the US market environment."
It's yet another touchstone amid the wider economic tension between the US and China. Across the economy, China seems to always be one step ahead of America. When China banned plastic imports, the US suddenly had to deal with its own plastic waste. When China ramped up making computer chips, America rushed to catch up. And when China put cheap electric vehicles on the market, the US quickly imposed heavy tariffs to avoid hurting the domestic EV market. Now, Chinese-owned mines are sucking the energy out of the US.
For Fisher of the Sierra Club, the solution is multifaceted. He said it's important to have transparency and ensure regular electricity ratepayers aren't subsidizing bitcoin-mining facilities. "Right now, it's profitable to mine cryptocurrency at electricity costs that put steel mills out of business," he said. "We might need to implement fees to ensure that the grid stays affordable for ratepayers and industries." His final recommendation is an ambitious one: a moratorium on new mining facilities.
Fisher isn't alone in calling for a pause on building new facilities. Harrison, Arkansas' City Council, for example, enforced a multimonth moratorium on a Green Digital facility after witnessing citywide opposition to the project. It ultimately greenlighted the project, but it showed that a city council was capable of enforcing a moratorium.
Given how much energy bitcoin mining consumes, it's worth questioning whether its presence in the US is really worth the trade-off. The bitcoin lobby's rosy vision for the future has so far been confined to the realm of utopianism and, if left unchecked, could accelerate a climate dystopia for us all.
Taylor Dorrell is a writer and photographer based in Columbus, Ohio.
About Discourse Stories
Through our Discourse journalism, Business Insider seeks to explore and illuminate the day’s most fascinating issues and ideas. Our writers provide thought-provoking perspectives, informed by analysis, reporting, and expertise. Read more Discourse stories here.
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