Crypto Woes: High Energy Use, Few Local Economic Benefits, Volatility, and Continued Crime: Proposed U.S Crypto Tax Failed in 2023, and Malaysian Bitcoin Miners Steal over $1 Billion in Electricity

     I have argued several times about the shortcomings of cryptocurrencies, including investment volatility, extremely high energy use (including electricity use that is causing power prices to rise for all of us), high water use, contributions to critical resource use and e-waste, and their favor and popularity among criminals and money launderers. Here, I want to point out a report about crypto’s lack of generation of economic benefits for the localities where it is used, and a situation in Malaysia where criminals stole massive amounts of electricity for Bitcoin mining.

     China banned crypto in 2021, which I think was a smart move, although economically, I am not so sure. It was certainly a smart move to discourage criminal behavior. Unfortunately, those crypto miners just went to other countries to operate, including the U.S. The EIA reported in February 2024 that cryptocurrency mining was responsible for 2% of U.S. electricity use, more than the total electricity use of some entire U.S. states. They noted then:

“Recent growth is largely due to cryptocurrency mining operations relocating to the United States from China after that country cracked down on digital currency mining in 2021, though reports indicate that there may still be some mining in China. As cryptocurrency mining has increased in the United States, concerns have grown about the energy-intensive nature of the business and its effects on the U.S. electric power industry. Concerns expressed to EIA include strains to the electricity grid during periods of peak demand, the potential for higher electricity prices, as well as effects on energy-related carbon dioxide (CO2) emissions.”

It was also reported that the:

“U.S. was home to 38% of bitcoin mining at the start of 2020, up from a little more than 3% two years earlier.”

 

     Note the lack of significant crypto mining in California, where electricity prices are high.

     According to other sources, the U.S. is now at about 75% of the world's total, now dominating the industry.  

     In 2023, the Digital Asset Mining Energy tax was proposed to tax crypto miners up to 30% for their power use. The proposal failed.

     Obviously, crypto miners want to operate where the cost of electricity is low, so they seek out such places. Increasing power demand means more upgrades needed by utilities, which tends to increase power costs for all, including residents. Thus, in that sense, we are all paying for crypto, the criminals’ choice for money handling. I have also read that somewhere around 30% of the data centers being built are not AI data centers, but crypto data centers. That is why when someone says data centers, they need to stipulate whether this means AI data centers or all data centers, a significant amount of which can be digital mining operations. AI has some great economic and societal benefits. Crypto has very few. This revelation, frankly, pissed me off.

     There are some cases where crypto mining is less harmful, such as where it is used to take advantage of stranded natural gas in oil basins, where turbines or reciprocal motors burn the gas for electricity, or where it runs on renewable energy.  

     As Ars Technica reported, some crypto miners, being large loads, have taken advantage of demand response programs, where they are paid significantly not to run during high-demand periods.

“Since bitcoin mining is the antithesis of an essential activity, several mining operations have signed up for demand-response programs, where they agree to take their operations offline if electricity demand is likely to exceed generating capacity in return for compensation by the grid operator. It has been widely reported that one facility in Texas—the one at the former aluminum smelter site—earned over $30 million by shutting down during a heat wave in 2023.”

 

Malaysian Crypto Miners Steal $1.1 Billion in Electricity: The Problem of Illegal Crypto Mining

     In Malaysia, crypto miners stealing power is a massive problem, with estimates of $1.1 billion being stolen. Authorities are trying to crack down, but have had limited success. Bloomberg reported:

“Drones buzz over rows of shops and abandoned houses, sweeping for pockets of unexpected heat, the thermal signature of machines that shouldn’t be running. On the ground, police carry handheld sensors that sniff out irregular power use. Sometimes the pursuit is more low-tech: residents call in with complaints of strange bird noises, only for officers to discover nature sounds being used to mask the roar of machinery behind closed doors.”

     It is estimated that there are about 14,000 illegal Bitcoin mining operations in Malaysia. At times, it causes challenging situations for the grid, making it harder to manage demand and stressing equipment. In Malaysia, abandoned malls and industrial spaces have been used for illegal crypto mining.

     Rolling power outages have been attributed to crypto. An article in Futurism notes:

“Rolling power outages in Iran last year, for instance, sparked a heated debate over the role of illegal Bitcoin mining. Kuwait similarly cracked down on crypto mining earlier this year amid a “major” power crisis that has led to blackouts.”

     Obviously, illegal crypto mining can be immensely profitable if the criminals can get away with it. There is a dire need to take those opportunities away by cracking down. Such lucrative opportunities make criminals successful, promote a world where crime and corruption proliferate, erode ideas of fairness and morality, and should be stopped through detection, interdiction, convictions, deterrence, shaming, and whatever else we can do. The disadvantage of legal crypto mining is that miners are subject to considerable volatility in the market, which means they can lose money when the market is down. Those who steal power are not affected, or much less affected by that volatility, as their main cost input is free. Illegal crypto operates much like any organized crime, it has been observed. I might add that if more crypto companies moved over to Proof-of-Stake for solving, like Ethereum has, then stealing power would not be such an advantage, making it less lucrative for criminals. Thus, one could argue that the current method, Proof-of-Work, is responsible for both the increased energy demand, which also leads to better opportunities for criminals.

     The Cambridge Digital Mining Industry Report, published in April 2025, is an excellent resource that tracks the industry. I didn’t realize that the U.S. dominated the industry so much, as can be seen below.

     Crypto hardware has gotten more efficient, which has kept energy use from skyrocketing even more than it has.

     They also note that more miners are using off-site power, which reduces the stress on power grids. They point out that estimating the environmental and climate impacts of crypto depends on knowing what energy sources power the grid, the electricity mix. The graph below shows that fossil fuels power most crypto, and renewables are at the bottom of the pack. One reason for that might be that power is generally cheaper where fossil fuels power the grid, particularly in the U.S., where natural gas prices are low.

     There is also a graph showing the current adoption rates for using stranded natural gas for flare mitigation. This is happening in the Permian Basin and some other oil basins with high flaring rates.

     The report also notes that some crypto miners are using their computing power for AI’s computational needs, including by investing and providing computational power for model training. Mining digits and training models are similar endeavors.

     As noted in the graph below, illegal crypto mining is way down, although it has fluctuated up and down in recent years. While overall illegal rates as low as 0.12% may seem like illicit mining is not much of a problem, that may represent quite a lot of money.

“Nevertheless, in absolute terms, illicit activity remains substantial, totalling $40.9 billion in 2024 – which Chainalysis considers the lower bound. This highlights a persistent challenge for the industry and regulators alike.”

     They also note that types of criminal activity continue to change and evolve, with some even utilizing AI.

“The types of crypto crime have also changed in recent years, characterised by a shift in priorities and increasing sophistication. While some forms of illicit activity, such as those associated with darknet markets and certain types of fraud shops, showed signs of decline, others, including theft and various scams, remained significant challenges. Ransomware persisted as a notable threat, despite some successes in law enforcement disruption, and DeFi platforms continued to be attractive targets for theft, alongside centralised services. Hacking remains a critical concern, with sophisticated groups, for example North Korea’s Lazarus Group, employing advanced techniques such as crosschain bridges and newer mixers to obfuscate funds and evade detection, demonstrating the ongoing adaptation of laundering tactics. The increasing use of emerging technologies, such as artificial intelligence (AI), in scams and fraud also marked a concerning trend.”

 

 

  

References:

 

Report reveals concerning side effect of cryptocurrency industry in US: 'Does not generate'. Danielle Meyers. The Cool Down. December 7, 2025. Report reveals concerning side effect of cryptocurrency industry in US: 'Does not generate'

Bitcoin miners on the run after stealing $1.1 billion in electricity. Victor Tangermann. Futurism. December 6, 2025. Bitcoin miners on the run after stealing $1.1 billion in electricity

Large-Scale Crypto Mining Consumes 2% of US Electricity. PYMNTS. February 4, 2024. Large-Scale Crypto Mining Consumes 2% of US Electricity

China Declares All Cryptocurrency, Related Transactions Illegal. PYMNTS. September 24, 2021. China Declares All Cryptocurrency Illegal

Tracking electricity consumption from U.S. cryptocurrency mining operations, Enegry Information Administration. February 1, 2024. Tracking electricity consumption from U.S. cryptocurrency mining operations - U.S. Energy Information Administration (EIA)

Over 2 percent of the US’s electricity generation now goes to bitcoin: US government tracking the energy implications of booming bitcoin mining in US. John Timmer. Ars Technica. February 2, 2024. Over 2 percent of the US’s electricity generation now goes to bitcoin - Ars Technica

Bitcoin Miners Hunted After Stealing $1 Billion of Electricity from Malaysia Grid. Bloomberg. December 3, 2025. Bitcoin (BTC) Miners Hunted After Stealing $1 Billion Power From Malaysia Grid - Bloomberg

Cambridge Digital Mining Industry Report: Global Operations, Sentiment, and Energy Use. The Cambridge Centre for Alternative Finance. April 2025. 2025-04-cambridge-digital-mining-industry-report.pdf