Mining companies are steadily relocating to regions in Malaysia, Indonesia, Laos, and Thailand following China’s 2021 ban on the sector.

A once abandoned 68,000-square-meter plot in Borneo’s industrial park, previously used for wood processing and bird’s nest farming, has now become a bustling site for cryptocurrency mining in 2023.

Under a large metal roof, over 1,000 high-capacity mining machines operate daily, transforming the deserted area into an unprecedented mining hub.

Located in Tanjung Manis, Malaysia, this facility is the largest of four mining operations in the region run by Bityou. Peter Lim, Bityou’s owner, chose this site after having to shut down a major mining center in China.

“Most mining companies have left Chinese industrial parks. We decided to leverage abandoned resources in some Southeast Asian countries,” explained Peter Lim.

Relocation Trends

Peter Lim is one of many miners now emerging in Southeast Asia. However, not all operators in this field are legal. China was once the dominant player in Bitcoin mining, accounting for about three-quarters of global activity, according to the University of Cambridge.

When Chinese authorities declared cryptocurrency-related transactions illegal, the industry faced severe disruptions.

“At that time, the local government simply confiscated your property,” said Alex Loh, Lim’s colleague at Bityou.

Loh recounted how about 3,000 of his machines were seized in Inner Mongolia. Similarly, a 120 mW plant in Sichuan province faced the same fate. “We spent about three months building those facilities, but had to shut down in less than a month,” Loh added.

Despite China’s crackdown, Bitcoin’s price has quadrupled since early last year, now trading around $67,000. According to The Block Research, large institutional interest has boosted miners, who earned $960 million in revenue in May.

Bitcoin’s strong performance also helped mitigate the impact of the “halving” event in April, which occurs every four years to reduce miners’ rewards by half.

Southeast Asia’s Appeal

In January 2022, the US led the global hashrate, a measure of computing power used to process Bitcoin transactions, followed closely by Southeast Asian countries. The University of Cambridge data reveals that Malaysia contributes 2.5% of the global hashrate, ranking it among the top 10 countries. Alexander Neumüller, head of Cambridge’s research team, noted that Malaysia and Indonesia are showing the most significant growth in the region.

Peter Lim attributed Southeast Asia’s attractiveness to the availability of cheap electricity, skilled labor, and existing infrastructure. Many mining centers are capitalizing on abandoned areas with low rent and minimal government oversight to facilitate their operations.

While regulations remain unclear, many mining companies are gradually moving towards legal operations in Southeast Asia to ensure a stable power supply and avoid future legal issues.

 Finding New Locations

Building mining centers poses challenges. Companies, like Lim’s, often choose remote locations with minimal regulatory oversight. However, unstable infrastructure and energy supply present new obstacles for large mining centers.

In Laos, a burgeoning hydropower industry saw cryptocurrency mining stall due to a severe drought in early 2023, prompting the state power company to cut energy supply to miners. Somboun Sangxayarath, a consultant at Electricite Du Laos, noted that cryptocurrency mining accounts for over a third of Laos’ total energy demand.

In Malaysia, Indonesia, and Laos, miners often face surprise checks by local police for illegal electricity usage. Malaysia’s energy minister, Takiyuddin Hassan, reported that electricity theft by Bitcoin miners has cost the country about 2.3 billion ringgit ($550 million), with the figure continuing to rise in early 2022.

Despite these challenges, the cryptocurrency mining sector is projected to grow robustly in Southeast Asia. “Bitcoin mining in Southeast Asia is set to expand significantly in the coming years,” said Taras Kulyk, CEO of SunnySide Digital, a mining equipment distributor.

Bityou’s Peter Lim remarked that miners in Southeast Asia “must find unique ways to adapt, whether through electricity pricing or regional competition.” He emphasized the need for miners to innovate to maintain a competitive edge in the industry.