Chinese bitcoin miners, caught between regulatory overhaul and massive carbon footprint, are weighing whether to relocate overseas or quit the sector. But a few of them are gearing up to invest in green energy to reduce their emissions. 

While most of them plan to migrate to countries in Central Asia like Kyrgyzstan, which has recently framed regulations related to cryptocurrency use, a section of operators are keen on investing in hydropower and solar and wind farms to ensure a stable power supply. 

"Bitcoin miners thrive in the country because of the cheap electricity, easy availability of land, affordable labor and safety. But things have changed for us in recent years because of the recent regulatory changes," said Arthur Lee, CEO of SAI, a bitcoin and computing company.  

"Since we are in an emerging sector, we keep our operation decentralized with a part of it located in other countries, including the U.S and countries in Central Asia, for a smooth transition when policies are not favorable."

Elon Musk's recent tweet to consider accepting bitcoins if miners reduce their energy consumption and the Chinese government's restriction on mining and trading cryptocurrency have prompted Chinese cryptocurrency miners to switch over to green energy. 

Musk had earlier expressed concern over high energy use by bitcoin mining, leading to a slump in the currency's value. 

Energy nomads trying to adapt to the new normal

Many Chinese bitcoin miners enjoyed an uninterrupted power supply in Inner Mongolia until the local government shut down the operations to meet its climate goals.

But abundant hydropower in Sichuan came as a lifeline. They started migrating between two provinces and the Xinjiang Uygur Autonomous Region and Yunnan, turning them into energy nomads. 

Miners enticed by cheap hydropower in Sichuan move their operations to the province during rainy seasons for four to five months. They return to Xinjiang, Yunnan or Inner Mongolia in dry months. The availability of affordable labor near hydropower plants makes it easy to install mining rigs and maintain them. 

The scale of migration remains high, as they want their machine to keep computing nonstop to generate more bitcoins. 

As Xinjiang and Yunnan are also getting skeptical about the sector's exceptionally high energy use, miners are pinning their hopes on Sichuan. The province has convened a meeting with them this month, according to a Global Times report.   

The race for cryptocurrency has become so intense that today, more than 65 percent of the global bitcoin mining operations happen in China. And the scale of emission from the sector could reach up to 297 terawatt-hours (TWh) by 2024, emitting greenhouse gases equivalent to Qatar, according to a recent study by Chinese researchers.

Chinese biotin miners' decision to go green coincides with the recent establishment of the Bitcoin Mining Council for voluntary declaration of energy use by mining companies. Still, some remain keen on moving abroad. 

However, such translocation appears to be a daunting affair. "It won't be an easy task," warned Alex Brammer, vice president, business development of Luxor & Hashrate Index, U.S.

Most of the mining rigs used for generating hash rates belong to the old generation with low efficiency and consume a lot of power. It won't be economically viable for these miners to load their machines in containers on transoceanic ships, Brammer said.

The outdated machines might increase the operation cost of electricity in other countries.

Time to invest in green energy

With a majority of countries trying to become carbon neutral, shifting bitcoin mining overseas, for many, doesn't appear to be a long-term choice. A section of bitcoin miners in the country now plans to access clean electricity and are reaching out to power companies instead of quitting the sector. 

"We are trying to collaborate with power generation companies to know the status of excess energy generation, and they can be connected to bitcoin mining to prevent the energy wastage," Lee said. 

"The cheapest energy is where the energy is idle," he said. Idle energy here means electricity generated by solar and wind farms, which couldn't be utilized because they are not connected to a grid. 

Around 17.1 percent of total wind-generated power has gone to waste as of 2017. In 2019, China wasted 2.7 percent, or 1.24 billion kilowatt-hours (kWh) of solar power and 4 percent, or 4.35 billion kWh, of wind energy, according to the country's National Energy Administration (NEA). China's State Grid had set a goal for the new energy utilization rate at above 94 percent for 2020.

A significant percentage of the country's solar and wind energy potential is based in Xinjiang, Inner Mongolia and Gansu. And in recent years, the utilization rate of new energy in those regions has increased after considerable waste due to insufficient grid construction and high production costs. In 2020, the new energy utilization rate in Gansu Province exceeded 95 percent for the first time.

And there are ways to adopt emission reduction strategies. "In the U.S, government and bitcoin miners have come up with sustainable, stable, regulatory environment and frameworks to allow cryptocurrencies to grow," said Brammer.

Gryphon Digital Mining in the U.S. raising $14 million to establish renewable energy-driven bitcoin mining operations is just one example of efforts been made to reduce the sector's emission. Similarly, Texas, a state flourishing with cryptocurrency miners, has formed a council to deal with the sector's issue. 

Most Chinese bitcoin miners remained aloof of their energy use for years. Recent announcements by the government to become carbon neutral have prompted the sector to wake up to the new normal.

"We should not forget that bitcoin mining generated huge tax revenue and created job opportunities, helping country's fight against poverty," said Liu Changyong, professor at Blockchain Economic Research Institute at Chongqing Technology and Business University.

"There is a risk of losing a sector that was nurtured from 2013 to 2017. Policymakers, power companies and bitcoin miners should come together to resolve the issue," he added. Such steps would be a "win-win deal for everyone."