China, which accounted for more than half of global Bitcoin production until a few months ago, banned payment companies and other financial institutions from offering services related to cryptocurrency transactions in May 2021. Not just that, it also warned investors against speculative cryptocurrency trading, in what has been a major crackdown on crypto assets. As a result of this massive clampdown, many big cryptocurrency mining companies are moving out of the country with their systems — including computers that are the most crucial part of the mining process. Cheap electricity in China made it favourable for many companies to undertake cryptocurrency operations on a large scale.
The expensive cryptocurrency mining machines are prone to damage if shaken. It can cost up to $12,000 (roughly Rs. 8.76 lakhs) per system. And the companies are now having to compute transportation costs and decide whether to send these machines by air or sea, according to a report by The Wall Street Journal. Bit Digital, a Nasdaq-listed company, has reportedly moved more than 20,000 computers out of China.
Samir V. Tabar, Bit Digital’s Chief Strategy Officer, was quoted by the report saying that Bit Digital had hired large international logistics companies to help them move their machines. He hopes to get the computers in North America by September-end.
Fred Thiel, Chief Executive Officer at Marathon Digital Holdings, a Las Vegas-based cryptocurrency mining company, was quoted by the US daily saying that the Chinese crackdown has had a pretty big financial impact on the miners, who operated from there. “It’s kind of like GM having to shut down a plant and build a new one elsewhere,” he reportedly said.
Cheap electricity, especially in Inner Mongolia and Xinjiang as well as Sichuan and Yunnan in China, despite its longstanding position against speculative crypto trading, made these preferred destinations for mining companies. Interestingly, Bit Digital, anticipating a clampdown, is said to have started moving its systems out of China in 2020 itself, but many others were caught off-guard.
Alejandro De La Torre, Vice President of Poolin, a cryptocurrency mining pool that operated in China, reportedly said that a crackdown on mining was always in the back of their minds but was never a pressing issue until the country initiated it. The report says the exodus of mining companies from China is also being referred to as the “great mining migration” by many.