China’s crypto crackdown sparks Thai crypto-mining boom

Bangkok, Thailand – The moment the axe fell on China’s massive cryptocurrency mines, Thai entrepreneur Pongsakorn Tongtaveenan was ready to swoop – quickly buying up redundant computer processors needed to retrieve Bitcoin from the network and shipping them to Southeast Asia.

“Chinese miners got rid of their machines and the price collapsed by 30 percent,” Pongsakorn told Al Jazeera.

Prices have now returned to more than $13,000 for the new “miners” – the computer hardware that solves the complex math puzzles which release the Bitcoin rewards from the network.

Still, Pongsakorn, 30, has been able to sell hundreds of units across Thailand as small players jump into cryptocurrencies as China cracks down on the lucrative market.

In September, Beijing banned all cryptocurrency trading and mining amid concerns virtual currencies were “breeding illegal and criminal activities” and posed a risk to the “economic and financial order”.

The crackdown forced some of the world’s largest Bitcoin mining operations to seek out new bases with friendly regulations and the essential ingredient of cheap electricity to run thousands of computers around the clock.

The biggest packed up and shifted operations to the United States – particularly Texas – Malaysia, Russia and Kazakhstan among other countries.

But for many smaller miners keen to quickly cut and run for fear of incurring the wrath of China’s authoritarian government, the priority was to claw back some money on their now useless computers.

That created an opportunity for entrepreneurs like Pongsakorn, who was on hand to whisk the unwanted gear – mainly the Bitmain Antminer SJ19 Pro – from Shenzhen to Thailand.

“Bitcoin is the gold of the digital world. But a mining rig is like gold mining stocks: you’re paid dividends according to the gold price,” he said.

Pongsakorn’s rigs have fuelled a cottage industry of miners across Thailand, each of whom can earn $30-40 daily from each running machine.

“There’s around 100,000 Thai miners now,” he said.

Their ranks include people chasing a stable income during the pandemic, but also investors who believe in the future of digital assets.

“The moment China banned crypto, we were ecstatic,” one Bitcoin enthusiast turned miner, who runs a small solar-powered processor from his garage in eastern Thailand, told Al Jazeera.

For an initial outlay of about 1 million baht ($30,000), he got a rig up and running.

“I made it all back in three months,” said the miner, who asked to remain anonymous.

Many bigger Thai investors are closely watching neighbouring Laos, which is tacitly embracing the rise of cryptocurrencies.

The poor, officially communist country of 7.2 million people has an internet penetration rate of just 43 percent, according to a 2020 study by internet and social media analysts We Are Social and Hootsuite.

But its advantage is an abundance of cheap electricity generated by dozens of mega-dams.

“More than 95 percent of electricity produced is made for export, so the excess must be used otherwise it is a big waste for the government,” an expert on Laos’s crypto regulations told Al Jazeera, requesting anonymity.

“They see an opportunity to transform that excess into millions of dollars.”

In November, the communist government opened up crypto mining and trading by offering licences to six large, well-connected Laotian companies.

The initial terms of the licence include a $5m surety for any company planning to trade crypto, while mining operations have to sign up to buy about $1m of electricity from the Laotian state grid a year and pay a large operating fee.

“Laos is handicapped by geography and lack of human capital,” David Tuck, a partner with Bangkok-based risk consultancy Lyriant Advisory, told Al Jazeera.

“It desperately needs cash in government coffers and has few options to generate revenue.”

Laos’s mega-dams, often debt-funded, produce electricity for neighbours including Thailand that have a diminishing need for externally sourced power.

“New demand from a major domestic buyer would be very welcome,” said Tuck.

But any Chinese miners thinking of slipping over their southern border to plug into cheap Laotian electricity would still be within easy reach of close ally Beijing.

“They’d be operating in China’s back yard,” Tuck said.

‘Enemy of states’

Some observers fear the gains of crypto will go to just a handful of connected companies. The regulations favour “a very restricted group in Laos,” the expert on Laos’s crypto regulations said. “It’s totally not open to the Laos public, Laos consumers.”

In Thailand, one of Asia’s most unequal societies, it is the rich who are crafting the rules of the bigger crypto game despite the trend of small-scale investors piggy-backing on leftover Chinese mining units.

In November, a unit of Thailand’s oldest bank, Siam Commercial Bank (SCB), paid $537m to purchase 51 percent of shares in BitKub, Thailand’s biggest crypto exchange. Thailand’s King Maha Vajiralongkorn owns 23 percent of SCB.

As regulators finally allow Thais to easily trade digital currencies, BitKub is looking to soak up the fees of millions of domestic customers, with ambitions to become Southeast Asia’s largest trading platform.

For some Thai crypto enthusiasts, BitKub’s emergence is viewed with suspicion as an attempt to centralise a once renegade form of finance.

“Bitcoin’s purpose was to become the ‘enemy of states’… but the rich have taken it over,” said the miner who spoke on condition of anonymity. “If you can’t fight that, you might as well just jump on board.”