At the beginning of 2021, China housed approximately 75% of the world’s cryptocurrency mining capacity. But in May 2021, China announced a domestic crackdown on mining and trading Bitcoin, the most popular cryptocurrency, resulting in a mass exodus of huge Chinese cryptocurrency firms. Following this, in September, Chinese regulators completely banned all domestic cryptocurrency trading and mining, speeding up the relocation process.
One of the major reasons the Chinese government cited for its cryptocurrency crackdown is the massive carbon footprint cryptocurrency mining leaves behind. This carbon footprint is due to the huge amounts of electricity required to “mine,” or create, a single digital coin. By some estimates, the Bitcoin network uses as much energy in one year as Argentina. Thus, if China continued to house around 75% of the world’s cryptocurrency mining capacity, it would be impossible for China to meet its environmental sustainability goals.
Therefore, when Chinese cryptocurrency firms looked to relocate after the Chinese government cracked down on cryptocurrency mining, they wanted somewhere with cheap electricity and lax regulations: two things Texas has in spades. Thus, Texas was the top destination for many Chinese cryptocurrency firms. This mass Chinese cryptocurrency exodus coincides with Texas governor Greg Abbott’s recent declaration that he intends to make Texas the world’s next cryptocurrency capital, indicating a mutually beneficial partnership between the state and the displaced Chinese cryptocurrency firms. These are the reasons Texas is the number one crypto destination in the United States, followed by New York, Kentucky, and Georgia.
Since 2003, China has invested a total of $4.3 billion in greenfield investment in Texas, and the relocation of major cryptocurrency firms could add a hefty amount to this total. For example, the Hong Kong-based company Poolin, which is the world’s second largest Bitcoin mining operation, plans to relocate to Austin, Texas. Additionally, Shenzhen-based firm BIT Mining will invest $26 million to build a data center in the state, and Beijing-based Bitmain plans to construct a cryptocurrency mining operation center in Rockdale, Texas.
While the sudden relocation of several huge cryptocurrency firms could have a positive economic impact on Texas, the energy-intensive nature of these mining firms could also pose a challenge, especially considering the breakdown of Texas’ power grid in February of this year. The environmental considerations of these large cryptocurrency firms moving to Texas will also be an important question, since some Bitcoin miners have already sought deals with US fossil fuel firms. All this means that the partnership between the Texas government and these Chinese cryptocurrency firms will be critical going forward.
Kimery Lynch is a Projects Coordinator at the East-West Center in Washington. She recently graduated from the University of Hawai'i-Mānoa with her MA in Asian Studies.