All of this poses a natural question. Are crypto miners pivoting to AI?

The short answer is that while most bitcoin-only miners are not, larger shops are exploring their options. “I haven’t thought about that or really heard of anyone doing this,” says an influential home bitcoin miner who goes by the alias Econoalchemist.

The reason is simple. Most bitcoin miners use specialized ASICs chips, such as the Antminer S19 Pro, that are designed for SHA-256 hashing (Secure Hash Algorithm). They are excellent at mining bitcoin but lousy for doing anything else. They can’t be repurposed. (Every bitcoin miner I reached out to said the same thing.)

The math is different for larger operations. While the actual ASICs can’t be converted from bitcoin to AI, the infrastructure that the companies have already built -- cooling systems, security, access to cheap energy -- can be used for an expansion into AI.

So they’re starting to expand. Applied Digital, a Texas-based crypto miner, recently announced a $460 million deal to host AI cloud computing in its data center. (Wall Street approved; shares immediately jumped 17%.) Iris Energy, another Texas-based mining company, announced an expansion and revitalization of its high-performance computing (HPC) data center strategy, which was generally viewed to mean a push towards AI. (Again Wall Street approved; shares surged by 21%.)

Skeptics might see this as a ploy to capitalize on a fashionable trend – like how in 2017, Long Island Iced Tea made the natural pivot to “Long Blockchain Corp.” But the companies view it as a way to reduce systemic risk. Mining profits correlate with bitcoin prices. So adding other services -- like hosting AI computing -- lessens the reliance on bitcoin.

“The business is looking for a diversified revenue stream. If bitcoin goes to $10k or $20k, we’re in a less stressed position, and can still act strategically compared to our peers,” says Josh Rayner, VP of High Performance Computing at Hut 8, which until recently had been exclusively a cryptocurrency mining company.

Hut 8 began its pivot early. In January of 2022, well before the hype of ChatGPT, Hut8 invested in five data centers and two cloud regions that could be devoted to HPC. Unlike the laser focus of bitcoin-mining ASICs, these data centers are packed with Nvidia GPUs that could perform a wider range of workloads -- gaming, virtual reality, AI, machine learning. And they still continue to operate bitcoin rigs. “Our core thesis is that we picture a world where mining and data centers and HPC workloads [used for AI] come together,” says Rayner, “and we’re starting to see that more and more.”

Back in early 2022, it occurred to Hut 8 that they’ve already done some of the heavy-lifting to service AI customers. “We have the staff. We have the compliance. We have the expertise to operate traditional data centers,” says Rayner. “Mining really goes hand in hand with that. You have a lot of the same synergies.”

Then there’s the pivot from Ethereum mining to AI.

When Ethereum switched from Proof of Work (which requires mining) to Proof of Stake (which does not), suddenly the ETH-mining equipment had nothing to do. And while the bitcoin mining ASICs can do nothing but mine bitcoin, the chips they used to mine Ethereum -- Nvidia A40s -- are more versatile. “They’re very capable of VFX rendering, of gaming, and they can do AI/ML [machine learning] workloads,” says Rayner. So the chips that once mined Ethereum have now been redeployed.

(Rayner clarifies that the old ETH chips are “limited in scope in what they can do,” and that they “come with low memory and low storage capacity.” But better to put them to use than to let them sit idle.)

So how exactly do the chips of Hut 8 power the development of AI? Here’s a real-world example. XYZ AI, a startup, wants to let people convert plain text to 3D imagery. They need to train their models using a massive data set, and that requires chips for extensive processing. If you’re a startup like XYZ, you can either purchase the chips yourself -- and chips are hard to come by -- or outsource the computing to a cloud provider like Hut 8. (It’s a similar model to parking data on the cloud with Amazon Web Services.) So XYZ is essentially renting out computing from Hut8.

In the future, this will allow XYZ’s users to type in something like “show me a sword that is dripping with melted strawberry ice cream,” and then magically see the image. Generative AI is just one of the AI categories that require processing horsepower. “There are a zillion of these specific types of applications that these chips are being used for,” says Rayner. “That’s why demand is absolutely exploding.” He cites medical technology, gaming, biology, and CAD drawing as other potential customers for Hut 8. Each of them “start with a big-data set, and that’s where model training comes into play.”

Mintgreen, a Canadian company that recovers heat from bitcoin mining and then uses it to harness power, is in the early “conceptual” stages of exploring an expansion into AI. “We’ve had questions from our investors about the possibility of a pivot,” says Colin Sullivan, Mintgreen’s CEO. Sullivan clarifies that this is still just theoretical and says “I need to investigate the economics deeper,” but he acknowledges that “down the road, it’d be wise to diversify into other computer-intensive electronics.”

Ramp Network, a startup offering payment infrastructure to connect crypto and traditional finance, opened a local entity in Brazil in a bid to expand into Latin America.

In the South American country, the company will offer its software development kit (SDK) for clients — including Web2 enterprises, crypto wallets and Web3 games — enabling their users to buy crypto via an end-to-end, non-custodial on-ramp, as well as offering a crypto to fiat off-ramp.

“This year, we are fully dedicated to establishing a strong presence in Latin America, and the reason for that is that this is a very interesting market for us,” Łukasz Anwajler, chief technology officer at Ramp, told CoinDesk, citing latest survey published by blockchain data analytics platform Chainalysis.

He said that Brazil ranked seventh in the list of countries with the highest crypto adoption while Latin America as a region accounted for 9.1% of all crypto value received globally last year, according to the data from Chainalysis.

Recent crypto regulatory clarity in Brazil was one of the reasons for Ramp to open an entity in the South American country, Anwajler stated. In December, Brazil passed a law that creates a “virtual service provider” license, which is to be requested by digital asset companies, including exchanges and trading intermediaries.

Several companies have been expanding into Latin America and particularly in Brazil recently. Earlier this year, giant crypto exchange Coinbase (COIN) said that it integrated the Brazilian government’s payment system Pix and started allowing crypto purchases with Brazilian reals.

In Brazil, Ramp will look to link up with local payment networks, such as the widely used Pix, which is also hiring in the South American country, said Anwajler, adding that Brazil will serve as Ramp’s hub for Latin America, as the company plans to continue to grow in the region.

Hana Bank plans to research certificates of deposit tokens, while Woori Bank’s research department has recently released a report on the tokens.

Several private banks in South Korea are studying the potential of tokenized deposit technology, an alternative to both private stablecoins and central bank digital currencies (CBDCs).

According to a report from Maeli Business News Korea, Hana Bank and Woori Bank — both private enterprises with headquarters in Seoul — showed interest in so-called “certificate of deposit” tokens (CDs). CDs are tokenized bank deposits put on the blockchain, replacing customary notes and deposits without disrupting the existing banking system. CDs also require identity verification of the same standards as any traditional bank service.

Hana Bank plans to research CD tokens, while Woori Bank’s research department has recently released a report on the tokens.

From the bankers’ perspective, it seems CDs have few disadvantages. As the report specifies, the interest in them stems from the anxiety that the stablecoin failures of 2022 raised among the financial regulators. According to anonymous senior bankers cited in the report:

“CD tokens are perceived as stable from the banks’ perspective since they do not differ significantly from the current system.”

Another important feature is CDs’ potential compatibility with CBDCs. Both of the banks mentioned above are participating in the proof-of-concept test for a CBDC by the Bank of Korea.

Related: South Korean Shinhan Bank completes stablecoin remittance pilot with Asian partners

In July, the Bank of Korea revealed its ongoing preparation for the potential introduction of a CBDC, which included investigating the use of smart contracts, offline payments with near-field communications and cross-border payments.

The pilot program with 14 private banks is already functioning. However, there are still some technical issues; the system, which has been managing to handle 2,000 transactions per second — higher than most domestic payment systems can facilitate — slowed down as it reached capacity. The Bank of Korea is now looking into ways to improve the technical capacities of the project.

The crypto bills could hand power to the purportedly more crypto-friendly CFTC and better define the SEC’s jurisdiction.

Since 2022, there have been at least 50 digital asset bills reportedly introduced to Congress, aiming to govern everything from stablecoins to the jurisdictions of United States regulators.

However, at least four of them are seen as potentially having a major impact on the industry (if passed) — given the attention from lawmakers and the crypto industry alike.

Financial Innovation and Technology for the 21st Century Act

This bill introduced on July 20, aims to create a solid process for determining if a digital asset is a commodity or security and would clarify the jurisdictions of regulators.

Introduced by Republican members of the Agriculture and Financial Services Committees of the United States House, the bill would give the Commodity Futures Trading Commission (CFTC) power over digital commodities and clarity on the Securities and Exchange Commission’s (SEC) jurisdiction.

A process for crypto assets that have been labeled securities would also be given a path to be re-labeled as commodities — which could see some projects revived after being effectively shut down due to past legal decisions.