China’s crackdown on bitcoin and other cryptocurrencies has seen mining operations look to move to other, more friendlier countries. One such benefactor of the ban is the US, which has seen an influx of miners who are drawn to cheap energy and the added benefit of a democratic court system.
The New Bitcoin Mining Hub
The sleepy town of Rockdale has become the new center of Bitcoin mining operations, with North America’s largest bitcoin mine located in the town. Rockdale was already an important part of a bustling mining industry in America, which has now seen renewed growth thanks to China’s crackdown on crypto, which has pushed the industry towards America.
According to most experts, cheap electricity and a clear rule of law have played a significant role in making the United States an attractive prospect for Bitcoin miners. CEO of miner Whinstone, the company that operates the Rockdale site, Chad Everett Harris, stated,
“There’s a lot of competitors coming into Texas because they are seeing the same thing (as) when we came here.”
Riot Blockchain owns the Rockdale mining site.
China’s Crackdown On Crypto
Before the Chinese crackdown, China was the nerve center of a majority of crypto-mining operations, with the country holding two-thirds of the global bitcoin mining capacity in 2019. However, with the government planning to launch its own Central Bank Digital Currency (CBDC), Beijing outlawed all transactions involving crypto.
As a result, crypto activity in the United States has doubled, as figures released by the University of Cambridge reveal, with America’s market share increasing to 35.4%.
Samir Tabar, the chief strategy officer at Bit Digital, revealed that the company that started to relocate from China in 2020 doubled its efforts after the crackdown intensified and set up operations in the US and Canada. He called the Chinese ban an “unintended gift,” stating,
“China’s bitcoin mining ban was basically an unintentional gift to the US,” he said. “Thanks to their ban, an entire sector migrated to North America – along with innovation, labor, and machines.”
The United States Is An Attractive Prospect
There are several reasons why the United States has emerged as a favorable destination for crypto operations. However, most experts believe that a democratic system of government and a legal system that protects property rights are key factors. David Yermack, an expert in crypto at New York University, revealed the thinking behind the move, stating,
“If you’re going to make long-term investments and accumulate wealth in a country, you want to have some confidence that it’s not going to be taken away by the government,”
However, he also stated that he expects the move to be temporary, as Nordic countries are a much more attractive prospect with cheap and abundant sources of renewable energy and more favorable weather for mining operations.
The Environmental Backlash
An increase in US-based mining operations has also led to growing criticisms of the industry from an environmental point of view due to the significant energy consumption of the mining industry. The use of non-renewable power sources such as fossil fuels that contribute to climate change has also been criticized.
However, Everett Harris disagreed, stating that the industry is, in fact, using power from sources that are not detrimental to the environment, stating,
“To think that we’re causing harm or pollution or all those things here… the majority of our power comes out of the ERCOT grid, and that profile is extremely friendly to the environment.”
Data from ERCOT for 2020 has revealed that 46% of its power comes from natural gas, with wind energy and solar energy accounting for a further 25%, with coal contributing around 18%.
Low-Cost Of Electricity
Texas has emerged as a key location for Bitcoin mining operations thanks to the market being deregulated, allowing companies to operate with more flexibility, buying electricity when it is cheaper, and putting off buying it when it is more expensive.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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