As the saying goes "one man's trash is another man's treasure", China has kicked out 90% of Bitcoin miners, but the rest of the world seems to be benefiting from the move. Kazakhstan is now reaping the benefits of crypto miners fleeing China, while Beijing continues to lose revenue and vital technology.
Although critics say crypto-mining comes with huge environmental costs, it contributes immensely to the economic development of the global economy. First, a single data centre can employ hundreds, if not thousands, of engineers, security guards, and other scientists. Second, mining operations pay various taxes to their governments and still buy other services such as water and electricity. Data centres are also avenues of research and development that could potentially spur technology leadership in the countries where they operate.
Iran was dragged into an economic recession after the harsh economic sanctions imposed by the US. The Iranian government explored all options and had no luck until it turned to crypto-mining to save its collapsing economy. Until earlier this year, when Iranian President Hassan Rouhani changed his mind and launched a crackdown on crypto miners, citing high electricity consumption, Iran was able to use crypto to continue trading with its partners in other parts of the world. The country was able to buy foreign-made cars with locally mined cryptocurrencies, according to the report by CoinIdol, a world blockchain news outlet.
Although China has long been the world leader in bitcoin mining and mining video card production, with 70% of all global bitcoin production taking place in the communist country. For example, Dalian bitcoin mining in the Chinese city of Dalian is the world's largest with a total monthly bitcoin production of over 4,000, with more than 350,000 mining machines plugged in and running 24/7 thanks to cheap electricity in China.
China's electricity costs are among the lowest in the world. On average, Chinese consumers pay 15% less than the cost of electricity in the US. China, as already known, is the world's largest manufacturing workshop for electronics and mining equipment is easier to acquire and install in the country. The Dalian mine employed at least 5,000 people and paid a million dollars for electricity per month and much more in taxes to the Chinese government. This is such a reliable and juicy source of revenue for the communist regime.
But all that is now a thing of the past after the government shut down crypto mining this year. Right now, more than 90% of Chinese miners have unplugged their machines and fled the country to seek safer places like the US, Vietnam, Kazakhstan, and others. The government continues to hunt down crypto miners.
Kazakhstan, a country located just a few miles from northwest China's Xinjiang province, is becoming more crowded as miners leave Beijing. Kazakhstan is suitable for Chinese miners not only because of its proximity to China, but also because of its friendly government policies and abundance of coal. Kazakhstan is the largest coal producer in the world and could meet, if not exceed, the high energy needs of crypto miners. Miners in the country pay just $0.04 per kWh compared to $0.234 per kWh in Germany, which is nearly six times higher.
Canaan, one of the largest crypto equipment manufacturers, has now set up its crypto mining business in Kazakhstan with its own mining equipment manufactured by Avalon, while BTC.com has managed to move its first group of miners to Kazakhstan and Bitmain is on its way out of China. The company has also cancelled its Antminer Maintenance Training Centre (AMTC) operations in China and instead opened numerous training centres in the U.S. this month after the Chinese government cracked down on crypto mining.
Beijing stands to lose heaps of revenue after driving respected tech companies out of the crypto-mining industry. With the current restrictions, even China's homegrown tech companies like Bitmain are no exception. Bitmain is a renowned bitcoin mining chip maker with a total revenue of $2.5 billion in 2017 and the company grew even faster after that, employing up to 300 people by 2021.
Canaan, another company affected by the Chinese government crackdown, is a multi-million dollar company that employs hundreds of Chinese people. In December 2020, the company announced that it closed 2020 with revenues of $68 million.
All those big chunks of wealth are now on their way to Kazakhstan, the US and elsewhere. It's unclear how President Xi's dream of leadership in semiconductors and chipmaking will come true if it shuts out critical tech companies operating in the country. China's technology development currently relies on semiconductors and chips from overseas, mainly from the US. As of April 2021, China imported US$33.1 billion worth of semiconductors.
While China is managing to drive out crypto miners, the move is rather counterproductive. Beijing will push many Chinese out of tech jobs, spend more on importing cutting-edge technology such as computer chips and semiconductors, and lose billions in revenue. Neighbouring countries like Kazakhstan, on the other hand, will benefit from China's expulsion of crypto miners.