Quick Take:

• Bitcoin miners flock to Southeast Asia, setting up in abandoned malls and factories.
• Countries like Malaysia, Indonesia, and Laos offer competitively priced power and skilled labor.
• The region’s existing infrastructure and low-cost electricity attract former Chinese miners.

In the wake of China’s stringent crackdown on cryptocurrency mining, a new wave of Bitcoin mining operations has emerged in Southeast Asia, revitalizing abandoned malls, factories, and other industrial spaces. These miners, driven by the allure of affordable power and a skilled workforce, have set up shop in countries like Malaysia, Indonesia, and Laos, turning once-desolate locations into bustling hubs of digital currency production.

One such location is a 6.87-hectare cement slab in Borneo’s industrial area, previously a site for a logging company. The site, with its rudimentary structures and a towering four-story concrete birdhouse designed to attract swiftlets for their valuable nests, has found a new purpose. In 2023, over 1,000 Bitcoin mining machines began operating under a vast sheet-metal roof, with hundreds more awaiting deployment.

This site in Tanjung Manis, Sarawak, is the largest of four operations in the area managed by Bityou, a Bitcoin mining company led by Peter Lim. Lim relocated his operations to this location after being forced to shut down a larger 20-megawatt setup in China due to the country’s 2021 ban on Bitcoin mining. “Most of the companies already left this industrial park,” Lim explained. “We decided, why don’t we make use of these abandoned resources?”

The migration of miners like Lim to Southeast Asia reflects a broader trend prompted by China’s severe crackdown. Once the dominant global player, accounting for about three-quarters of worldwide Bitcoin mining activity in 2019, China’s landscape drastically changed after authorities declared all cryptocurrency-related transactions illicit. This move devastated the industry, leading to widespread equipment seizures and shutdowns.

“Back then, some of the state governments just seized your property,” recalled Alex Loh, Lim’s colleague at Bityou. Loh experienced firsthand the impact of the crackdown, with approximately 3,000 of his machines confiscated in Inner Mongolia. He also faced similar setbacks with a 120-megawatt site in Sichuan province. “We spent about three months to build that place,” Loh said. “But once we started our operation, less than a month, we had to stop.”

Despite the harsh regulatory environment in China, Bitcoin’s value has surged, quadrupling since the start of the previous year to around $67,000 by mid-June in Singapore. This increase, partly fueled by the U.S. launch of spot Bitcoin ETFs in January, has reinvigorated institutional interest and provided a boon for miners. In May alone, miners earned $960 million in revenue, according to The Block Research.

The shift in the global Bitcoin mining landscape is evident in hashrate data, which measures the computational power used to process transactions on the Bitcoin network. By January 2022, the U.S. had become the global leader in terms of hashrate, as per Cambridge University data. Southeast Asian nations are also rising in the ranks, with Malaysia contributing 2.5% of the global hashrate, placing it among the top 10 countries. Preliminary data suggest that mining activity in Indonesia also significantly increased in 2022.

Peter Lim emphasized the factors that make Southeast Asia attractive for miners: competitively priced power, skilled labor, and existing infrastructure. This combination provides a conducive environment for miners relocating from China and other regions. Malaysian police, however, have occasionally taken stringent actions, such as flattening $1.25 million worth of Bitcoin-mining machines with steamrollers, highlighting the regulatory challenges miners may face.

The influx of mining operations in Southeast Asia extends beyond repurposing industrial spaces. Abandoned shopping malls, former steel factories, and sites near hydroelectric power projects are being transformed into mining hubs. This is because miners in the region lack the option to exploit power gluts as U.S. miners do, who can ramp up operations during periods of low power demand for preferential rates. Fred Thiel, CEO of Marathon Digital Holdings, one of the world’s largest Bitcoin miners, noted that Southeast Asia’s approach differs due to its unique energy dynamics.

Manufacturers of mining rigs have also shifted

their operations to Southeast Asia, seeking to meet the burgeoning demand and circumventing U.S. tariffs on Chinese products. Before 2018, when former President Donald Trump imposed a 25% duty on a range of electronic goods from China, Bitcoin rig production was predominantly based in Shenzhen and Guangzhou. Ben Gagnon, chief mining officer at Bitfarms, highlighted this transition, noting the strategic relocation of manufacturing to align with the new centers of mining activity.

The relocation of Bitcoin mining operations to Southeast Asia signifies a broader geographical shift in the industry. Countries like Malaysia, Indonesia, and Laos offer a confluence of factors that attract miners: affordable electricity, skilled labor, and existing infrastructure. These elements are crucial for the power-intensive process of Bitcoin mining, which involves solving complex encryption puzzles to earn new tokens.

In Malaysia, for example, the emergence of Bitcoin mining in abandoned industrial spaces is transforming the economic landscape. Industrial areas that were once derelict are now buzzing with activity. The Tanjung Manis site in Sarawak, managed by Bityou, is a prime example. What was once a disused logging site now houses thousands of mining rigs, sheltered under a massive sheet-metal roof. This repurposing of abandoned spaces not only revives these areas but also stimulates local economies by creating jobs and infrastructure improvements.

The shift to Southeast Asia also underscores the resilience and adaptability of the Bitcoin mining industry. Following China’s crackdown, which once accounted for the majority of global mining activity, miners have demonstrated an ability to pivot quickly to new, more favorable locations. This adaptability is crucial in an industry where regulatory landscapes can shift rapidly and dramatically.

However, this migration is not without its challenges. While Southeast Asia offers many advantages, it also presents regulatory hurdles. Instances like the Malaysian police destroying mining equipment highlight the ongoing risks that miners face in the region. Navigating these regulatory environments requires a careful balance of compliance and operational efficiency.

Despite these challenges, the overall outlook for Bitcoin mining in Southeast Asia is promising. The region’s favorable conditions have not only attracted miners but also manufacturers of mining equipment. Companies that previously operated exclusively in China have expanded their operations to Southeast Asia, driven by the need to avoid tariffs and meet local demand. This trend is likely to continue as the global mining landscape evolves.

The economic impact of this shift extends beyond the immediate benefits of job creation and infrastructure development. The influx of Bitcoin miners and equipment manufacturers is fostering a broader technological ecosystem in Southeast Asia. This includes the development of new technologies and expertise related to blockchain and cryptocurrency, which can have far-reaching implications for the region’s digital economy.

In Indonesia, for instance, the rise in mining activity has spurred interest in related fields such as cybersecurity, software development, and financial technologies. These developments contribute to a more diversified and resilient economy, capable of leveraging the benefits of the digital revolution.

Moreover, the increasing institutional interest in Bitcoin, highlighted by the surge in value and the launch of spot Bitcoin ETFs in the U.S., provides a supportive backdrop for miners. The strong performance of Bitcoin and the revenue generated by miners, which reached $960 million in May, underscore the profitability and viability of mining operations, even in the face of regulatory challenges and market fluctuations.

The future of Bitcoin mining in Southeast Asia will likely be shaped by ongoing developments in both technology and regulation. As the industry continues to grow, there will be a need for clear and consistent regulatory frameworks that balance the interests of miners, local communities, and governments. These frameworks will be essential for ensuring the sustainable development of the mining industry and its integration into the broader economic fabric of the region.

In conclusion, the migration of Bitcoin mining operations to Southeast Asia represents a significant shift in the global cryptocurrency landscape. Driven by China’s crackdown, miners have found new opportunities in countries like Malaysia, Indonesia, and Laos, where they benefit from competitively priced power, skilled labor, and existing infrastructure. While challenges remain, the region’s potential for growth and development in the digital economy is substantial. As Southeast Asia continues to rise in prominence within the global Bitcoin mining industry, it will play a crucial role in shaping the future of cryptocurrency and blockchain technology.