14-6-2024 (KUCHING) Amidst the remnants of a once-thriving logging industry in the heart of Borneo, an unexpected new occupant has taken up residence – Bitcoin miners. On a 17-acre cement slab in the industrial area of Tanjung Manis, Sarawak, the incessant hum of over 1,000 computer rigs reverberates, as they tirelessly solve complex encryption puzzles in pursuit of digital riches.
This sprawling operation, sheltered beneath a vast sheet-metal roof, is the largest of four sites run by miner Bityou in the region. Its owner, Peter Lim, was forced to relocate from China after the country’s crackdown on Bitcoin mining in 2021, which decimated an industry that once accounted for three-quarters of global mining activity.
“Most of the companies already left this industrial park,” said Lim, surveying the abandoned structures and a four-story-tall concrete birdhouse originally built to lure swiftlets for their coveted nests. “We decided, why don’t we make use of these abandoned resources?”
Lim is one of many miners who have flocked to Southeast Asia in the wake of China’s ban, attracted by the region’s competitive power prices, skilled labour, and readily available infrastructure. His colleague, Alex Loh, recounts the harsh realities they faced in China, with authorities seizing thousands of their machines and shuttering operations they had spent months building.
Despite the challenges, the allure of Bitcoin’s meteoric rise – quadrupling in value since the start of 2022 – has fueled renewed interest from institutional investors, providing a much-needed boost for miners. Globally, they earned a staggering $960 million in revenue in May alone, according to data from The Block Research.
The United States may have surpassed China as the global leader in Bitcoin mining hashrate – a measure of computational power – but Southeast Asian nations are rapidly rising through the ranks. Malaysia currently contributes 2.5% of the global hashrate, placing it among the top 10 countries, while preliminary research suggests Indonesia’s mining activity has “markedly rose” in 2022, according to Alexander Neumüller, a research lead at Cambridge University.
The region’s appeal extends beyond just mining operations. Manufacturers of Bitcoin rigs have also shifted some production to Southeast Asia, seeking to meet burgeoning demand and circumvent U.S. tariffs on Chinese goods. Ben Gagnon, chief mining officer at Bitfarms, notes that “the vast majority of miners now are produced in Malaysia,” with facilities also operating in Thailand, Indonesia, Taiwan, and the U.S.
Setting up shop in Southeast Asia, however, is not without its challenges. Miners often find themselves in a precarious position due to frequent shifts in regulatory stances and conditions that tend to favour smaller-scale operations.
In Laos, a burgeoning hydropower industry initially attracted miners, but an extreme drought this year forced the state-run power company to cut off their electricity supply. Police raids on miners illegally siphoning energy are a regular occurrence across the region, with electricity theft by Bitcoin miners costing Malaysia an estimated $550 million as of early 2022.
Despite the obstacles, significant growth is expected in both mining and manufacturing. “Southeast Asia is poised to take off in the next few years,” said Taras Kulyk, founder and CEO of SunnySide Digital, a distributor of data centre hardware.
As Lim surveys the boxed-up machines awaiting deployment, he acknowledges the unique challenges faced by miners in the region. “We have to find some kind of unique setup, whether it be in terms of the price of power or lack of local competition, some sort of incentive, something to give us a bit of an edge.”
