• China’s ban on Bitcoin mining shifted operations to the US.
• Energy concerns and local opposition as pro-lobby pushes for expansion.

Cryptocurrencies had a glorious era in China. The nation led the world in Bitcoin mining due to China’s low energy costs and favourable regulations.

By 2021 China was responsible for about 70% of global cryptocurrency mining activity. Xi Jinping’s 2019 initiative, which urged China to adopt blockchain technology, strengthened the country’s market dominance and propelled it ahead of the US in terms of blockchain technology research and development. However, all of this came to a sudden halt in May 2021 when China dramatically revised its cryptocurrency policies.

China’s rise and fall in cryptocurrency mining

The Chinese government’s change of heart disallowed cryptocurrency mining and transactions, claiming concerns about criminal activities like money laundering, causing the industry to collapse. Zongyuan Zoe Liu, a senior fellow at the Council on Foreign Relations, stated that the decision was motivated by the potential threat that cryptocurrencies posed to China’s financial system. This crackdown pushed cryptocurrency miners to flee China in search of new homes, with many heading to Kazakhstan, attracted by its ample and cheap coal-produced power.

In the months following the ban, Kazakhstan’s share of global cryptocurrency mining surged to nearly 20%, up from 7%, according to the Cambridge Bitcoin Electricity Consumption Index. At the same time, cryptocurrency mining operations consumed 7% of the country’s energy, leading to significant fuel price hikes and widespread blackouts that affected the country at large. By the end of 2021, public dissatisfaction with the situation prompted Kazakhstan to cut off miners’ access to the national power grid.

Many cryptocurrency miners fled to the US, which quickly emerged as the new Bitcoin mining superpower. By 2023, it would account for more than 40% of the world’s Bitcoin “hashrate,” or the amount of computing power by Bitcoin creation. US-based mining facilities now use approximately 2% of the country’s electricity, which is similar to the power consumption of entire states like Utah or West Virginia. While this has not resulted in energy crises like those in Kazakhstan, the high power usage has prompted local criticism, particularly when Chinese-owned enterprises set up shop in America.

An example is a company known as Bit Mining, which was once the largest cryptomining operator in China. After brief operations in Kazakhstan, the company relocated to Akron, Ohio. Other similar companies operate in rural areas because these regions offer cheaper electricity and land. However, such facilities face fierce resistance from local citizens. Residents of Rockdale, Texas and Bono, Arkansas, are concerned not only about the noise and environmental impact of Bitcoin mining but also that these operations create few new jobs in their communities.

Jeremy Fisher, a senior strategy advisor at the Sierra Club, voiced concern about how much energy Bitcoin mining operations require. For example, a Riot Platforms facility in Texas consumes 450 megawatts of electricity, enough to power about 300,000 homes. With climate change worries growing, Fisher emphasised the importance of switching to renewable energy sources and questioned the sustainability of bitcoin mining’s energy requirements.

Environmental concerns and energy usage

Local opposition to Bitcoin mining is widespread. Residents in Murphy, North Carolina, and Massillon, Ohio, have organised petitions and protests, and created YouTube channels to raise awareness about the detrimental effects of mining operations in their areas. In Arkansas, a mother voiced concern about the noise’s impact on her autistic son, while in Akron, Ohio, residents were concerned about the increasing burden on local resources. Due to strong public resistance, several localities, such as Harrison, Arkansas have imposed temporary moratoriums on new mining sites.

Conversely, a burgeoning pro-Bitcoin lobby has arisen to advocate for the cryptocurrency industry’s interests. Their efforts have already influenced legislation in states such as California, where Governor Gavin Newsom vetoed a bill aimed at regulating digital financial assets after strong lobbying from the cryptocurrency industry. The lobby’s influence has risen to federal level, with lobbyists have spent more than $20 million to evade SEC oversight. Former President Trump, who had earlier criticised Bitcoin, promised to make the US the “crypto capital of the planet.”

However, as the Bitcoin business expands, questions about its centralisation intensify. Bitcoin mining, originally designed to offer a decentralised alternative to established financial systems, has become increasingly consolidated. In 2021, the National Bureau of Economic Research discovered that 10% of mining operators controlled 90% of mining capacity, raising concerns about the system’s true decentralisation. As China and the United States engage in economic competition, legislators have begun to question the influence of Chinese-owned mining companies operating inside US borders.

In response to this geopolitical tension, the Biden administration has begun to tighten control of foreign-owned mining enterprises. In May 2023, the President directed a Chinese-owned mining corporation to sell its operations near a nuclear missile facility in Wyoming, citing national security concerns. This approach shows a rising understanding of the hazards associated with foreign ownership in this rapidly-expanding business on US soil.

The future of cryptocurrency mining in the US

The future of Bitcoin mining in the United States is at a crossroads. While the Bitcoin lobby continues to advocate for deregulation and expansion, local communities and politicians at all levels are increasingly vocal. As Fisher and other concerned parties demand stronger controls or moratorium on new plants, it remains to be seen whether the industry’s growth will be stifled.

What is obvious is that if the energy-intensive procedures are not properly regulated, they compound already severe climate concerns, potentially leading to a future in which the costs of Bitcoin greatly outweigh the advantages.