Bitcoin Mining Puts Pressure on Many National Power Grids
Bitcoin mining's impact on the environment has been well-documented. Mining requires a large amount of electricity, thus pressuring energy-generating companies to burn more coal, natural gas, or other fossil fuels. Another problem is that a few illegal Bitcoin mines exist, costing electricity companies millions annually. Tenaga Nasional Berhad (TNB), Malaysia's national electricity company, has reported significant losses linked to illegal Bitcoin mining, exceeding 440 million Ringgit (about $101 million) in Malaysia alone.
Mining is now an integral part of Bitcoin and the cryptocurrency industry in general. Bitcoin mining is a complex set of computer-based and mathematical processes that generate a cryptographic solution that matches specific criteria. Once the correct solution is reached, the 'miner' gets rewarded through Bitcoin and fees for work done.
In Bitcoin mining, there's a race to crack the solution, with the first miner getting the reward for getting the solution. As such, Bitcoin mining is considered an energy-intensive activity with plenty of competition from individual, group, or even corporate mining firms.
Although mining is expensive and energy-intensive, many still participate. After all, Bitcoin mining is a lucrative business, and even though the reward has been reduced by half this year, it still stands at 3.125 BTC, which at current market prices is worth $209,370.31. Not bad.
So, it isn't surprising to know that there are plenty of aspiring Bitcoin miners, and there are those willing to skirt regulations just to join the mad rush for Bitcoin rewards. This competitive cottage industry has led to the growth of many illicit Bitcoin mining activities, mostly in developing countries, which are now putting some structural and financial strain on electricity companies.
Malaysia reports up to $727 million in electricity theft linked to illicit Bitcoin mining
According to several reports, Tenaga Nasional Berhad (TNB), Malaysia's national power company, has lost more than $101 million in the last few years due to illicit Bitcoin mining. Between 2018 and 2023, electricity theft by illicit Bitcoin miners cost the country approximately RM3.4 billion (or roughly $727 million).
According to Akmal Nasrullah Mohd Nasir, Malaysia's Deputy Energy Transition and Water Transformation Minister, electricity theft is growing in the country. If it persists, it doesn't just affect its TNB but also trickles down to the general population. Nasir made the statement in Balakong after the authorities destroyed seized electrical devices without security certificates from the country's Energy Commission.
According to Nasir, "The theft of electricity by those who mine cryptocurrency occurs because they believe this activity cannot be detected due to the absence of meters on their premises. According to the minister, tools and tracking devices can now detect pilferage, and the government is ready to pursue those who break the law.
During the conference, the minister witnessed the destruction of over 2,000 devices worth approximately $470,000. These were electrical items without the Energy Commission certifications used for Bitcoin mining. The Malaysian minister further shared that the devices were described under Sections 406A and 407 of the country's Criminal Procedure Code.
Aside from TNB, Sarawak Energy Berhad was also hit by the same problem. Sarawak Energy Berhad is another state-owned electric utility company that uncovered electricity theft for mining operations. According to the company, it has uncovered three crypto-mining operations in Miri using stolen electricity, resulting in monthly losses of RM 30,000.
In a raid conducted by the police and Syarikat SESCO Berhad (SESCO), the company discovered direct tapping cables in many residential homes in Pujut and Jalan Miri-Bintulu, which are used to bypass the meters and steal electricity. The raid confiscated over 70 crypto-mining servers and other electric devices, which are now used as evidence.
Power theft was also reported in Thailand
Power theft for illegal Bitcoin mining activities isn't limited to Malaysia. Thailand, its neighbor, has also reported a few incidents. Agence France-Presse reported last August 25th that Thai police and officials from the Provincial Electricity Authorities (PEA) raided an illicit Bitcoin mine in Ratchaburi town, west of Bangkok, after receiving complaints about "frequent blackouts" in the area.
According to Jamnong Chanwong, the chief district security officer, the authorities found Bitcoin mining rigs, and the occupants used the power they didn't fully pay for.
Russia also reports "frequent blackouts" due to uncontrolled mining
Frequent blackouts due to "illegal Bitcoin mining" have also been reported in Russia, particularly in its southern republic of Dagestan. According to a Reuters report, the local government has called for stricter measures to catch cryptocurrency miners in the area, draining the region's power supply. Abdulmuslim Abdulmuslimov, the local prime minister, urged the authorities to pay more attention to illegal Bitcoin and crypto mining after a fire erupted in the capital caused by the over-consumption of powers. Local authorities have concluded that the fire have been caused by "power-hungry" crypto mining operations in the area. Abdulmuslimov further shared that the operators of these illegal crypto-mining operators are now using new tricks to circumvent the law by installing underground mining farms.
Dagestan's illegal crypto mining woes have reached the Office of President Vladimir Putin, who warned against unregulated crypto mining in a recent statement. Putin said that an uncontrolled increase in electricity consumption for mining can lead to power shortages in certain regions.
Despite raids and crackdowns, Bitcoin mining is not illegal
Despite the recent crackdowns, Bitcoin and crypto mining services aren't illegal in many parts of the world. Only five countries, including China and Saudi Arabia, ban Bitcoin. Under current US laws, any individual or group that exchanges or uses Bitcoin, such as payment processors or exchanges, is considered a money services business or MSB. As such, these entities are subject to the country's Bank Secrecy Act and must be registered and required to file reports for transactions over $10,000.
In Malaysia, the Central Bank of Malaysia Act identifies Ringgit as its sole legal tender and classifies cryptos as securities. In short, these crypto assets are taxable, and active traders operating on the Digital Asset Exchanges must declare profits in their annual income tax returns.
For infrequent traders, they can classify their earnings under capital gains, which are not taxable. Bitcoin and crypto mining aren't prohibited in this country, but local authorities have intensified their campaign against illicit Bitcoin mining operators using stolen electricity. In Thailand, Bitcoin and crypto miners are considered "manufacturers"; thus, they must pay the requirements. However, this Southeast Asian country is witnessing an alarming rise in illegal Bitcoin mining.
Final thoughts on Bitcoin and crypto mining
As mentioned, Bitcoin and crypto mining are legal in most countries, but several jurisdictions have already tightened their regulations. China, for example, has banned Bitcoin mining, and the government has prohibited using all cryptocurrencies for online transactions. Nepal and Algeria have already banned mining and other crypto-related transactions.
It's important to note that regulations on crypto are constantly evolving as Bitcoin and crypto expand their technology and use cases. We can expect more countries to craft Bitcoin-specific policies, and others may ban mining in the future. The debate on Bitcoin and crypto's standing will continue, with stakeholders debating whether these are assets, securities, legal tenders, or a payment method.
