(Bloomberg) — As Donald Trump prepares to fulfill a long list of campaign promises, the president-elect’s vow to ensure all remaining Bitcoin is “made in the USA” could be one of the most challenging prove to be worth adhering to.
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Trump made the promise in June in a post to his Truth Social account after meeting at Mar-a-Lago with a group of executives from crypto miners, the companies whose massive, high-tech data centers do the work that facilitates transactions on the blockchain. in exchange for a fee paid in Bitcoin or other cryptocurrencies. The meeting was a key moment in Trump’s transformation from a crypto skeptic to one of the industry’s strongest allies.
“It’s a Trump-like comment, but that’s certainly not the reality,” said Ethan Vera, chief operating officer at Seattle-based Luxor Technology, which provides software and services to miners.
Although it is widely seen as a symbolic pledge of support, in practice it is virtually impossible, as blockchains are decentralized networks in which no one has control or can be excluded from participating in the process. From a practical perspective, the sector is becoming increasingly competitive as large-scale operations spring up around the world to capture a share of the tens of billions of dollars in revenue generated by the industry each year.
Russian oligarchs, royal families in Dubai and Chinese businessmen in Africa are among the freshest competitors. Deep pockets and access to enormous amounts of power spur them to participate in the lucrative but energy-intensive process. About 95% of the 21 million Bitcoin that will ever be created has already been minted, although the hard cap on production isn’t expected to be met for another 100 years or so.
The Bitcoin mining sector in the US has turned into a multi-billion dollar industry in recent years as the token has seen an exponential price increase. However, the total computing power generated by US-based miners is well below 50% and it is impossible to power the entire network by domestic companies, according to industry analysts.
While there is no public data indicating the sources of computing power from every region around the world, major crypto mining service providers such as Luxor typically have a good understanding of its composition. They have more specific information about mining locations through their software that aggregates computing power to increase miners’ chances of receiving Bitcoin rewards.
American miners such as CleanSpark Inc. and Riot Platforms Inc. quickly backed Trump, counting on the former president to relax controls on the environmental impacts of the high-energy consumption process, curb competition from abroad and reverse their positions. as restrictive guidelines under the Biden administration. Trump’s support for crypto helped generate about $135 million in campaign contributions during the last election cycle, the most of any sector.
“President Trump campaigned on a vision for America to remain the world leader on the next frontiers of technology, from cryptocurrency to AI,” Trump-Vance Transition spokesperson Kush Desai said in a statement. “The Trump-Vance Administration will work with industry titans and unleash our talent and resources to ensure American leadership and innovation in every facet of the cryptocurrency industry, from mining to end-use solutions.”
Despite the rapid expansion in the US and the latest bull run in the crypto market, economic sanctions by the US and rampant inflation in some emerging economies have pushed foreign miners to ramp up their activities even further.
“There’s tremendous growth coming in a few different markets,” said Taras Kulyk, CEO of Synteq Digital, one of the largest brokers for specialized computers for Bitcoin mining. Eastern European countries such as Kazakhstan are seeing increased demand, and “sales in Asia, Africa and the Middle East are all increasing,” Kulyk said.
Big sales in Asia indicate an increase in Bitcoin mining activities in China following a sweeping ban on such operations by the government in 2021. A softening stance on crypto from Russia is also fueling a revival of the industry in the country, according to Kulyk .
For some African and South American countries, Bitcoin mining margins are much higher compared to their US peers. Pockets of cheap energy are spread across Africa, with hydropower-rich Ethiopia one of the fastest growing crypto mining hubs on the continent. U.S. dollar-denominated mining revenues have provided a way for local operators in countries like Argentina to stay out of the inflationary spiral and safeguard their savings.
Even U.S. miners have begun expanding abroad as energy costs rise in states like Texas. MARA Holdings Inc., the largest miner by market capitalization, has announced plans to form a joint venture with a local company owned by a sovereign wealth fund in Abu Dhabi. The company aims to build one of the largest mining companies in the Middle East.
The activities in the US are also not entirely focused on domestic miners. Many miners offer hosting services, where anyone from the US or abroad can purchase machines and pay for the operations to run them and earn Bitcoin.
And there is another headwind that Trump threatens to bring upon American miners. A trade war with China would likely increase the cost of Bitcoin mining machines, most of which are manufactured by Chinese company Bitmain, especially considering that machines are one of the top two expenses for miners besides electricity. But for many miners, Trump’s benefits outweigh the harm.
“Trump is probably the best thing that could ever happen for Bitcoin mining,” Kulyk said. “He is a president who is pro-energy and pro-economic growth.”
–With help from Stephanie Lai.
(Adds comment from Trump spokesperson in ninth paragraph.)
