In 2023, a new industry has joined the fray: Bitcoin miners. Sheltered by a massive sheet-metal roof, more than 1,000 machines now hum away, while hundreds more sit in cardboard boxes nearby waiting to be unpacked.
The mine in Tanjung Manis, Sarawak, is the largest of four operated by miner Bityou in the region. Owner Peter Lim chose the site after he was forced to shut down a massive 10,000-rig, 20-megawatt mine in China following a 2021 ban on bitcoin miners. “Most companies have left this industrial park,” Lim said. “We decided, why not make use of these abandoned resources?”
Bityou's mining equipment in Sarawak. Photographer: Ryan Weeks/Bloomberg
He is one of many miners that have emerged in Southeast Asia after China cracked down on bitcoin mining, and while Lim said Bityou's operations are legal, not all miners are. China was once the dominant country in bitcoin mining, the process of using computing power to solve cryptographic puzzles in exchange for new tokens. In 2019, bitcoin mining accounted for about three-quarters of global activity, according to data collected by Cambridge University.
But the industry was hit hard when Chinese authorities announced that any crypto-related transactions would be considered illegal financial activities.
Despite China’s tough measures, bitcoin prices have more than quadrupled since the start of last year, trading around $67,000 at lunchtime in Singapore on June 13, fueled in part by the launch of a U.S. spot bitcoin ETF in January. The renewed institutional interest has been a boon for miners, who earned $960 million in May, according to data tracked by The Block Research. Bitcoin’s strong performance has partially offset the impact of April’s “halving,” a once-in-four-years event that slashes the rewards miners receive for maintaining the network.
Mining activity rises significantly in Southeast Asian countries
By January 2022, the United States had become the world leader in the Bitcoin network’s hash rate, a measure of computing power used to process transactions, according to data from the University of Cambridge.
Now Southeast Asian countries are also climbing. Cambridge data shows Malaysia contributes 2.5% of the global hash rate, placing it among the top 10 countries. Preliminary results from a recent mining study suggest activity in Indonesia will rise "significantly" in 2022, reaching a "low to mid-single digit percentage", said Alexander Neumüller, director of research at Cambridge.
Bitcoin mining activity shifts to the U.S., estimated share of global hash rate by country
Competitively priced electricity, a skilled workforce and, crucially, existing infrastructure add to the region’s appeal to miners, Lim said.
Abandoned shopping malls, former steel mills and hydroelectric projects are popping up across Southeast Asia as miners try to find locations with adequate power. That’s because the region can’t take advantage of “surplus power” options like U.S. miners can ramp up mining when power demand is low to get favorable prices, said Fred Thiel, CEO and chairman of Marathon Digital Holdings, one of the world’s largest bitcoin miners.
Despite the lack of clear rules, some miners in Southeast Asia are trying to operate within the law. Others are illegally stealing electricity, leading to government raids on mining operations.
Mining equipment manufacturers have also followed miners to Southeast Asia, moving part of their operations to the region to meet growing demand.
“The vast majority of mining machines are currently made in Malaysia. There are also manufacturing sites in Thailand, Indonesia, Taiwan and the United States,” said Gagnon, who has visited manufacturing facilities in Penang and Indonesia to conduct quality control checks for the Toronto-based mining machine maker. Some of those factories belong to Bitmain, others to its closest competitor MicroBT. Bitmain declined to comment, while MicroBT said in emailed comments that it has manufacturing sites in the region, with factories in Thailand and the United States.
Where to take root
For miners, opening a mine isn’t always easy. Like Lim, many have put down roots in unexpected places, often with their survival precarious due to frequent changes in regulators’ stances and an environment that often favors smaller mines.
Peter Lim and Alex Loh. Photographer: Ryan Weeks/Bloomberg
Laos has a thriving hydropower industry, but this year’s extreme drought has brought the country’s mining industry to a standstill, with the state-owned power company stopping power to miners. Somboun Sangxayarath, an adviser to the Lao Electricity Company, recently told Reuters that cryptocurrency mining now accounts for more than a third of all electricity demand in the country.
In Malaysia, Indonesia, and Laos, police frequently conduct raids on Bitcoin miners who illegally steal electricity. According to Takiyuddin Hassan, then Malaysia’s Minister of Energy and Natural Resources, Bitcoin miners’ theft of electricity has cost Malaysia an estimated 2.3 billion ringgit ($550 million), and as of early 2022, that figure is rising.
Near Lim’s Sarawak mining site in Kuching, another mining company is considering building a plant on vacant land that was once a steel and plastics factory, according to a promotional material seen by Bloomberg. Sovereign Sengalang and Sprint Capital Management launched operations in the area earlier this year and are looking to invest in developing “new brownfield sites.” The investment comes after the state government unveiled a plan last year to transform Sarawak from a resource-based economy to an “environmentally sustainable technology-based economy” by 2030.
Fans used to cool machines at the Bityou factory. Photographer: Ryan Weeks/Bloomberg
Despite the challenges, both the mining and manufacturing sectors are expected to see significant growth. “Southeast Asia is poised to take off in the coming years,” said Taras Kulyk, founder and CEO of SunnySide Digital, a data center hardware distributor.
Bityou’s Lim, surrounded by rows of machines, said miners in Southeast Asia “have to find some kind of unique conditions, whether it’s electricity prices or lack of local competition, some kind of incentive, something that gives them a little bit of an advantage.”
