Malaysian Government Blames $723M Electricity Theft on Illegal Crypto Miners But Is Bitcoin's Halving the Cause?

Illegal Crypto Miners Siphoned $723M Electricity in Malaysia

The Malaysian government has identified crypto mining as a significant source of electricity theft from its national power grid according to a report by Malay Mail.

Deputy Energy Transition and Water Transformation Minister Akmal Nasrullah Mohd Nasir revealed that between 2018 and 2023, illegal cryptocurrency miners cost Malaysia an estimated $723 million (RM3.4 billion) through electricity theft.

Typically, those involved in electricity theft avoid registering with authorities and resort to tampering with electricity meters or illegally tapping into power lines.

However, energy supply companies can employ various techniques to identify abnormal energy consumption patterns.

He warned:

“The theft of electricity by those who mine cryptocurrency occurs because they believe this activity cannot be detected due to the absence of meters on their premises. However, energy supply companies have various methods to detect unusual energy consumption in an area.”

He emphasized that the growing trend of electricity theft for crypto mining purposes is detrimental not only to the power company but also to the general population.

Speaking in Balakong, where officials destroyed confiscated electrical devices lacking Energy Commission certificates, Nasir warned that such activities affect the state-controlled power operator Tenaga Nasional Berhad (TNB) and local communities.

The minister highlighted that efforts to combat electricity theft are a top priority for the government.

He also witnessed the destruction of seized equipment, revealing that as many as 2,022 devices worth approximately $470,000 were destroyed.

These devices, including electrical equipment and bitcoin mining machines without Energy Commission certification, were confiscated in October 2022.

Deputy Energy Transition and Water Transformation Minister Akmal Nasrullah Mohd Nasir destroys RM2 million worth of seized electronic goods, including bitcoin mining machines seized in an operation in October 2022.

He said:

“These items have been ordered to be disposed of by the deputy public prosecutor in accordance with Sections 406A and 407 of the Criminal Procedure Code after going through the court and compound process.”

Malaysia Targets Illegal Crypto Miners with New Measures

Cryptocurrency mining is not inherently illegal in Malaysia, but the theft of electricity for mining purposes is considered a criminal act, as clarified by Universiti Teknologi MARA in December 2022.

Malaysian authorities have been actively enforcing regulations against cryptocurrency miners since at least August 2019, with Nasir affirming that these actions are conducted in accordance with the nation's criminal procedure laws.

In a notable enforcement action in July 2021, Malaysian officials seized thousands of Bitcoin miners and subsequently destroyed 1,069 of them using a steamroller.

Nasir underscored that combating illegal mining activities is a key priority for the Ministry of Energy Transition and Water Transformation, alongside initiatives to enhance Malaysia's renewable energy capabilities.

Unregistered Crypto Exchanges Under Fire in Malaysia

Beyond tackling illegal mining activities, Malaysian authorities have also targeted unregistered cryptocurrency exchanges.

Malaysia has established a legal and regulatory framework for cryptocurrencies, with the Securities Commission serving as the industry's overseer.

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Cryptocurrency tokens are classified as securities, and the country has been particularly vigilant in curbing tax evasion.

As reported by The Malaysian Reserve, the Inland Revenue Board (IRB) of Malaysia recently launched a special operation named Ops Token, aimed at reducing tax revenue losses from crypto trading and enhancing the nation's tax administration.

#Malaysia's Inland Revenue Board (#IRB) launched "#Ops Token" to tackle tax evasion in cryptocurrency trading. Raids in Klang Valley revealed significant tax revenue leakage from undeclared #crypto activities. #IRB Chief Datuk Abu Tariq #Jamaluddin urged traders to declare… pic.twitter.com/gdaDZnSYjf
— TOBTC (@_TOBTC) June 17, 2024
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In May of last year, the Securities Commission Malaysia directed Huobi Global, a cryptocurrency exchange, to halt its operations due to the failure to register its trading services.

Presently, HATA Digital, Luno, SINEGY, MX Global, Tokenize Technology, and Torum International are the sole registered cryptocurrency trading platforms in Malaysia.

Miners Shift Base After China's Ban

Cryptocurrency mining operations have been on the move, shifting from China—which imposed a ban on all domestic crypto mining activities in 2021—to the United States (US) and various other countries, including Malaysia, Indonesia, Laos, and Thailand, as reported last month.

Southeast Asian nations are particularly appealing to miners due to their competitive electricity rates, skilled workforce, and established infrastructure, as mentioned by a local miner.

While industry experts such as cryptocurrency venture capitalist Nic Carter have attributed this migration to China's rollout of a more efficient nationwide power grid, it is also a consequence of China's longstanding opposition to Bitcoin.

The latest ban, which expelled major mining operations from the country, compelled these enterprises to seek new locations for their activities.

Is Bitcoin Halving One of the Contributing Reasons of the Theft?

Bitcoin mining is a highly energy-consuming process that employs specialised computers, known as ASICs, to participate in a cryptographic lottery aimed at discovering a random number.

On average, every 10 minutes, a miner successfully identifies this number, appends the most recent block of transactions to the blockchain, and is rewarded with 3.25 BTC (equivalent to $187,000) for their computational work.

In the wake of April's bitcoin halving event, which halved the rewards for miners, many Bitcoin mining companies have sought to diversify their revenue streams and expand their mining capabilities.

According to data from Cambridge University, as of January 2022, the US commanded a close to 38% share of the global hashrate—a measure of the computational power dedicated to mining—establishing it as the leading producer of bitcoin worldwide.

Malaysia, with approximately 3% of the global hashrate share, secured a position within the top ten nations for bitcoin production.

According to the data, the graph below shows the estimated mining hash power breakdown by country in 2022 (accurate as of September 2023).

With the rewards halved and Bitcoin mining companies trying to expand revenues and mining capacities, could this be one of the reasons why crypto miners illegally siphon millions worth of power?