The Dark Side of Bitcoin Mining: A Look at Illegal Activities in Southeast Asia

In recent months, illegal Bitcoin mining operations have come under heightened scrutiny across Southeast Asia, revealing the lengths some individuals will go to in pursuit of this digital gold. While Bitcoin’s price remains volatile, its allure remains potent enough to entice miners to operate outside the law, as evidenced by troubling reports from Malaysia and Thailand.

The Scale of the Problem

On November 18, Malaysia’s national power provider disclosed an alarming statistic: over US$1.1 billion worth of electricity had been illicitly siphoned off by cryptocurrency miners from 2020 to August 2023 to fuel their operations. This staggering figure underscores the significant resources driving underground mining activities, primarily targeting Bitcoin.

In neighboring Thailand, authorities recently executed a raid on seven illegal Bitcoin mining sites, which collectively were valued at around 300 million baht (approximately S$12.2 million). Additionally, officials confiscated 270 million baht worth of mining equipment, linking these operations to transnational scam networks that often exploit regulatory loopholes for financial gain.

Understanding Bitcoin Mining

At its core, Bitcoin mining is the process by which transactions are verified and added to the public ledger known as the blockchain. Miners, using powerful computers, solve complex cryptographic puzzles, and the first to crack the code is rewarded with new Bitcoins. While increased computing power can enhance a miner’s chances of earning cryptocurrencies, it also significantly ramps up electricity consumption, representing around 70% of production costs.

Is Bitcoin Mining Profitable?

Historically, Bitcoin mining experienced its most lucrative period during the cryptocurrency’s 2017 bull run when prices peaked near S$20,000. By then, the "hashprice"—representing the amount miners could earn per unit of computing power—had reached about US$3.39 per terahash per second. Fast forward to recent times, and the profitability landscape has shifted dramatically, with miners facing unprecedented challenges. As of November 2023, the hashprice plummeted to approximately US$0.035 per terahash, and the average cost to produce a single Bitcoin soared to around US$74,600, pushing many operators into the red.

The Shift Towards Crime

As profit margins shrink due to rising production costs and fluctuating prices, some miners are resorting to illegal methods to remain operational. For instance, electricity theft has become increasingly attractive. Illegal miners find ways to circumvent electricity meters, allowing them to run high-powered rigs while reporting little to no consumption.

Moreover, these illicit operations have adopted advanced tactics to evade detection. Methods include employing heat shields to disguise heat signatures and installing surveillance systems to monitor potential threats from law enforcement.

In addition, there’s a rise in "cryptojacking," where unwitting users’ devices are commandeered to mine cryptocurrency without consent. This often involves malicious software bundled with seemingly harmless applications, tricking users into installing it.

The Situation in Singapore

While Singapore isn’t experiencing widespread reports of illegal Bitcoin mining, the government maintains stringent regulations against electricity theft. In Singapore, it’s illegal to fraudulently divert or consume electricity, with severe penalties including fines of up to S$50,000 and imprisonment for up to three years for those caught.

Cryptojacking incidents can lead to fines of up to S$5,000 or jail time of up to two years. In terms of taxation, Singapore’s approach varies based on the nature of mining activities. Hobbyist miners are not taxed on earnings, as the country does not impose a capital gains tax. However, those operating systematically and profit-driven could face a 17% corporate tax rate on their income.

Conclusion

The world of Bitcoin mining, particularly in Southeast Asia, is increasingly marked by a cat-and-mouse game between illegal operations and regulatory enforcement. As the mining landscape continues to evolve, it’s essential to be cognizant of the implications surrounding energy consumption, legality, and profitability in this intriguing but complex ecosystem.