This article is based on reporting for the seventh episode of CRYPTOLAND, Motherboard’s documentary series about how cryptocurrency is affecting culture, politics, the environment, and our shared future.
Outside a warehouse in upstate New York, Sam Tabar stands transfixed, gazing at a pile of coal as a Caterpillar excavator scoops chunks up for removal.
“It’s come full circle now,” he marvels.
Given Russia’s invasion of Ukraine and Kazakhstan’s own violent political unrest this January, the choice has brought to sharp focus the mining risks in closed societies versus open societies.
Tabar, the company’s Chief Strategy Officer, and the rest of the team spent months shipping units, each worth thousands of dollars, out by plane, train, and boat.
The Biden administration’s March executive order on cryptocurrencies, though absent on specifics, indicates that the US views digital assets as important to maintaining American leadership in global finance.
Kazakhstan saw an opportunity as mining units left China and its president, Kassym-Jomart Tokayev, welcomed crypto cowboys to his frontier, promising minimal regulation and cheap electricity.
In addition to low energy costs, Enegix CEO Yerbolsyn Sarsenov touted its northern operations in the near-Siberian cold as an asset, because Bitcoin mines generate a lot of heat, and keeping ASICs from overheating can be a challenge at certain mines.
A few months after the leader’s crypto pronouncement, the government unexpectedly limited the amount of power prospectors could tap into, saying it would be rolled back by up to 95 percent.
Following the unrest, Tokayev has devoted the past few months to consolidating power and putting pressure on the family and associates of Kazakhstan’s previous leader, Nursultan Nazarbayev, who ruled for almost three decades.
Alex Gladstein, author of Check Your Financial Privilege: Inside the Global Bitcoin Revolution and Chief Strategy Officer at Human Rights Foundation, believes most miners exiting China “would’ve preferred to have rack space in Canada, Iceland, Norway, or the United States.” China’s Bitcoin ban had happened quickly, and many Western operators were unprepared to absorb the flood of hardware.
It may still stick around as a significant player, however, given Russia’s new status as a pariah state and a potential exodus of Russian miners who would prefer to operate in a country free of sanctions.
The outcome for now however, puts the US firmly in the global lead, a warp speed transfer of wealth within one year from China — or a transfer of a boondoggle, depending on one’s assessment of cryptocurrencies.
Here US federalism is an asset, allowing states and cities to explore different policies.
“You’re probably going to see over the coming decade the majority of infrastructure inside countries that have stronger rule of law,” he says.