A combination of cheap electricity and cold weather has started to draw a growing number of Japanese bitcoin miners to Mongolia, a country sandwiched between China to the south and Russia to the north. Amid falling mining revenues in other regions of the world due to the current crypto bear market, companies that have set up shop in Mongolia have found they can still run profitable mining operations.
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Business Environment Harsh But Mongolia Is Still Profitable
Tokyo-based e-wallet company Ginco is operating two mining farms in Ulaanbaatar, Mongolia’s capital city. One facility is located at an underground structure in a condominium complex .The company launched the business in October, a time when its peers throughout the world were considering winding down operations as a result of declining bitcoin prices, which rendered mining unprofitable.
Altogether, Ginco now operates 600 mining machines and is planning to increase that number to 1,000 units in this quarter. “The business environment is increasingly harsh, but we can still produce a profit,” Yuma Furubayashi, chief executive officer of Ginco Mongol, told Japanese publication Nikkei Asian Review on Jan. 11.
The market has been unforgiving for companies involved in cryptocurrency mining over the past year. During that period, the price of BTC has plunged more than 80 percent from its all-time high of almost $20,000 in December 2017, leaving some miners on the brink of collapse. Coupled with the price decline, bitcoin extraction is becoming less profitable as a result of the network’s rising hashrate.
For example, Japan’s bitcoin mining hardware manufacturer GMO Internet Inc. wound down operations at the end of December after posting a loss of 24 billion yen ($218 million). The company, which will nonetheless continue to mine in-house, also announced that it is moving its mining center to a region with cleaner and less expensive energy.
In November, U.S.-based bitcoin mining firm Giga Watt filed for bankruptcy at a court in the Eastern District of Washington, revealing that it still owes its biggest 20 unsecured creditors nearly $7 million. Other medium-sized miners in China were recently forced to sell their mining rigs as scrap, to curb further losses.
Mongolia’s Freezing Weather and Cheap Electricity Attract Crowds
But with freezing weather and cheap electricity, Mongolia – one of a few countries where bitcoin miners can still generate a profit, along with the U.S. and Sweden – is slowly developing into a destination of choice for Japanese miners. The cooler temperatures help to reduce the need for cooling systems for the mining hardware.
Energy costs are a key factor in the profit equation of crypto mining. Electricity prices in Mongolia run at around a third of Japanese rates and lower than in China, which has been home to many crypto miners, the Nikkei Asian Review reported.
Another Japanese entity, iTools, began mining operations in Mongolia last summer. It says although the market is down, mining in Mongolia still returns a profit. The company has currently put on hold plans to expand its fleet of mining equipment, but CEO Tamir Bayarsaikhan indicated that the business has the capacity to deepen its expertize in blockchain technologies and create new business. iTools rents its gear from Tokyo-based advertising group Unimedia.
Statue of Genghis Khan
Crypto mining is an attractive year-around business for companies in Mongolia, whose core industries like mineral mining, agriculture, and tourism slow down during the harsh winter. The government is actively nurturing the country’s information technology sector, noted the article.
Last year, the Central Bank of Mongolia approved crypto-friendly legislation, and Mobicom – Mongolia’s largest telecoms network – decided to create its own cryptocurrency, known as “Candy”, whose value is pegged to Mongolia’s fiat currency, the tugrik.
This year, Mongolia has just announced a partnership with Terra, a blockchain payment system that is backed by exchanges such as Binance and Houbi. According to a recent Forbes report, the program will launch with two features: a peer-to-peer payment system to allow transfer among users of different banks, as well as a mobile payment system.
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