Malaysia's national utility firm Tenaga Nasional incurred losses of more than $1 billion (€860 million) from illegal power usage by cryptocurrency miners between 2020 and August this year, the country's Energy Ministry said earlier this month.  

Malaysian police have stepped up a crackdown, conducting several raids on suspected sites since January, as part of a multi-agency operation with energy regulators and anti-graft authorities to tackle electricity theft linked to crypto mining.

Tenaga Nasional said in a report to parliament this month that it had detected 13,827 establishments suspected of being illegal crypto mining sites.

"These activities not only threaten user safety, but also jeopardize the nation's economic stability, increase public safety risks ... and pose a serious threat to the national energy supply system," the public utility said in a statement.

China was once the world's largest site for crypto mining, an energy-intensive process that uses powerful computers to solve complex mathematical puzzles to validate cryptocurrency transactions and earn new digital coins as a reward.

But when China's government banned the practice in 2021, citing threats to the country's financial stability and energy conservation, several Southeast Asian countries moved quickly to welcome miners fleeing the crackdown, hoping to monetize cheap electricity and attract new investment.

Most notable was Laos, an energy-rich landlocked state, which in 2021 launched a public-private pilot program allowing a handful of firms to mine and trade cryptocurrencies using surplus hydropower.

Gathering storm

The mood around crypto mining has grown darker in recent months as China and also the United States have increasingly targeted Southeast Asia's vast cyber scam industry, which is allegedly closely tied to cryptocurrency exchanges and miners.

At the same time, Southeast Asian governments have found that the promised windfall from hosting miners has largely failed to materialize, while the costs to stressed power grids and climate targets are mounting.

Last month, the Lao government announced that it would discontinue its crypto mining program and likely halt electricity supply to miners by the first quarter of 2026, following poor results.

This was attributed to a lack of broader economic spillovers — such as jobs and local supply chains — as well as crypto miners consuming too much energy during the dry season, when hydropower output falls.

"Crypto doesn't create value compared to supplying it to industrial or commercial consumers," Deputy Energy Minister Chanthaboun Soukaloun told Reuters last month.

In March, Thailand's Central Investigation Bureau seized dozens of illegal crypto mining machines, which had been hidden in abandoned houses near the capital Bangkok. Authorities estimated they had cost the state utility around $327,000 in stolen electricity.

Last week, Malaysia's Energy Transition and Water Transformation Ministry said it had established a multi-agency committee to address the growing problem of electricity theft linked to crypto mining.

Economic and energy costs multiply

"Illegal activities, crypto mining or not, should be cracked down on, of course," Qiang Tang, an associate professor at the University of Sydney's School of Computer Science in Australia, told DW.

However, he added that the problem was illegal power use or theft, not crypto mining itself, which is not illegal in most Southeast Asian countries. "I think the attention should be more on the real issue, like how to improve power supply chain security in those countries," he said.

Saaidal Razalli Azzuhri, a telecoms expert at the University of Malaya, believed that the $1 billion loss figure was likely the lower bound of the electricity crypto miners have stolen in Malaysia.

"That number only covers premises that were actually found and inspected, and does not include undetected sites or long-term damage to transformers and cables," he told DW.

Because many cryptocurrencies, especially bitcoin, have a hard-coded limit on supply, their networks must undergo "halving" events, when new coin issuance is cut sharply, squeezing profits for crypto miners.

The last "halving" occurred in April 2024. After such an event, "mining only makes sense if your power is extremely cheap or stolen," said Azzuhri.

This may explain why some experts reckon that the incentive to steal electricity for mining has increased since last year.

But it's not just the economic costs that worry Southeast Asian governments.

In Malaysia, around 80% of domestic electricity is generated from coal or natural gas. Region-wide, fossil fuels still account for roughly three-quarters of the power mix, according to the International Energy Agency.

"Governments are increasingly uncomfortable with scarce, mostly fossil-fuel power being used for illegal bitcoin mining," Azzuhri said.

Scam states

All this comes amid a major global crackdown on cryptocurrency-fueled "pig butchering" scams and the vast scam compounds in Southeast Asia that run them.

According to some estimates, the illicit cyber-fraud industry in the Mekong region generates revenues equivalent to roughly a third to almost half of the combined formal economies of Cambodia, Laos and Myanmar.

A report by the United Nations Office on Drugs and Crime in April reported that transnational criminal groups from Southeast Asia were rapidly expanding their operations worldwide, using illegal crypto mining as a "powerful tool" to launder billions in illicit proceeds.

Earlier this month, the US government announced the creation of a new Scam Center Strike Force to combat a surge in cryptocurrency-investment fraud by transnational criminal organizations operating out of Southeast Asia, estimated to be defrauding Americans of nearly $10 billion annually, the Justice Department said in a statement.

It added that the US had already seized and forfeited more than $400 million in cryptocurrency and announced forfeiture proceedings for an additional $80 million to be returned to victims.

In October, the US and Britain imposed landmark sanctions on the Cambodian conglomerate Prince Group, which they alleged was operating forced-labor scam compounds across Southeast Asia and laundering the proceeds through casinos, real estate and cryptocurrencies.

The US authorities seized bitcoin worth about $15 billion from Chen Zhi, a naturalized Cambodian and the CEO of Prince Group, in what prosecutors called the largest-ever forfeiture action.

Chen, who has served as adviser to Cambodia's ruling family, was also indicted on charges of wire fraud and money laundering.

As Laos' U-turn and Malaysia's crackdown suggest, Southeast Asia seems to be edging towards a more skeptical, regulation-heavy approach to crypto — one that treats electricity as a strategic resource, and asks whether anonymous server racks really deserve pride of place on fragile, fossil-fuel-weighted power grids.

Edited by: Srinivas Mazumdaru