China’s ban on cryptocurrency mining has forced bitcoin entrepreneurs to flee overseas.
Many are now heading to Texas, USA, which is fast becoming the cryptocurrency capital of the world.
When China announced a crackdown on cryptocurrency and bitcoin trading in May, Kevin Pan, chief executive of Chinese cryptocurrency mining company Poolin, took a flight the next day to leave the country.
“We decided to move once and for all and for good. We won’t be coming back,” Pan told.
Based in Hong Kong, Poolin is the second-largest bitcoin mining network in the world, with most of its operations in China. The country was home to around 70% of the world’s bitcoin mining power, until the crackdown sent the price of bitcoin plummeting and caught miners off guard.
Now China’s “bitcoin refugees” are scrambling to urgently find a new home, whether in neighboring Kazakhstan, Russia or North America; because for bitcoin miners, time is literally money.
“We had to find a new location for the (bitcoin mining) machines,” says Poolin vice president Alejandro De La Torre. “Every minute the machine is off, it doesn’t generate money.”
In what some are calling “the great mining migration,” Poolin executives are among the many bitcoin miners who have recently landed in a location reputed to be the wild west of the United States – Austin, Texas.
Bitcoin is a digital currency with no physical form. They exist and are exchanged only online.
They are created when a computer “mines” the money by solving a set of complex mathematical programs, and this is how the bitcoin “miners” who run the computers earn the currency.
This requires a lot of energy.
As a new form of money that transcends national borders, it also creates a lot of confusion and the potential to run afoul of government rules.
That’s why the two things bitcoin entrepreneurs value are cheap electricity and a lax regulatory environment.
And the state of Texas fits the bill perfectly.
New frontier for bitcoin mining
For Pan, Texas felt like home almost instantly.
Days after his arrival, he was gifted an AR-15 rifle; and he says he might use it one day to hunt hogs from a helicopter.
While Texas shooting ranges and barbecues provide an entertaining welcome, legal protections for businesses are the biggest draw for bitcoin miners.
“What happened to us in China won’t happen in the U.S.,” De La Torre assures.
Texas Governor Greg Abbott has been a supporter of cryptocurrency.
“It’s happening! Texas will be a leader in cryptocurrencies,” he posted on Twitter in June.
In the same month, Texas became the second U.S. state after Wyoming to recognize blockchain and cryptocurrencies in its commercial law, paving the way for companies to operate in the state.
Many Chinese mining companies have sought stability and opportunities in Texas.
Shezhen-based Bit Mining has planned to invest $26 million to build a data center in the state; while Beijing-based Bitman is expanding its facility in Rockdale, Texas.
This small town of about 5,600 residents was once home to one of the world’s largest aluminum plants. And now it is emerging as the next global bitcoin mining hub.
There could be another underlying connection between the industry and Texas, as De La Torre says bitcoin miners and Texans share the same values.
“Texans take their freedom and rights very seriously, as do bitcoiners.”
Experts believe China’s crackdown on bitcoins was motivated by having greater control over financial markets. And it may become a boon for the US.
“The migration benefits the U.S. in terms of acquiring talent and fostering the innovation ecosystem,” says Kevin Desouza, a business professor at Queensland University of Technology who has researched digital currency policy in China.
In return, bitcoin miners gain access to a thriving and innovative community, as well as more diverse sources of capital, according to Desouza.