If you follow cryptocurrency news, you might be uncertain about several things. For most people starting out with crypto, they want to know if Bitcoin is legal in their regions?
More importantly, which countries have a positive outlook on cryptocurrencies so that Bitcoin mining remains legal for the foreseeable future.
To make Bitcoin mining as profitable as possible, this information should be cross-checked with electricity prices. Our guide examines bitcoin mining and some regions where mining is allowed.
This Guide Contains
What Is Bitcoin Mining?
For the uninitiated, the word “mining” obfuscates more than it reveals. However, it was chosen because mining denotes a great expenditure of resources to get to something valuable.
This is where the analogy between mining and cryptocurrency mining ends.
For a cryptocurrency like Bitcoin, miners perform two key roles:
- Adding new coins — blocks to the blockchain.
- Verifying transactions on the blockchain, serving as auditors who simultaneously solve the problem of double-spending.
For these roles, miners receive rewards in the form of Bitcoin, called Bitcoin block rewards. This is one way to acquire the cryptocurrency without buying it with money. You can also go through Stormgain’s free mining program to mine Bitcoins without hardware.
In short, Bitcoin mining occurs when mining computers (rigs) solve complex equations every ten minutes. Those that solve it first add a new block to the blockchain. Then, the miner is rewarded with BTC.
Therefore, the issue of “is Bitcoin legal” is rather moot when everyone can set up a computer in their home to mine it, but more on that later.
Is Bitcoin Mining Still Profitable?
If you were to buy a professional-grade mining rig, such as Whatsminer M21S, you would need to account for its hash power and expenditures to determine the daily profits. Let’s take the following factors, of which only electricity cost may differ based on your location:
- Hash power: 56 TH/s
- Power consumption: 3360W
- Current BTC price
- Electricity cost: 0.1 USD/kWh
Altogether, by using the previously mentioned calculator, you would earn:
- $11.46 per day
- $349.27 per month
- $4,249.41 per year
A single Whatsminer M21S machine would generate this net profit, which could be further improved if your electricity cost is lower — solar, hydroelectric dam, subsidies, etc. Nowadays, companies have honed Bitcoin mining to a science, which is why Bitcoin miners keep seeing record profits despite the block reward halving.
Of course, one cannot neglect to mention the biggest driver of Bitcoin’s price — the Federal Reserve. During the last year, the Fed’s money-printing machine had gone into overdrive. Some estimate that about a quarter of all dollars were printed in one month than in two centuries. This massively devalues the dollar, which is likely to cause (hyper)inflation.
Using Bitcoin as a hedge against inflation is a major factor in its continued adoption by major institutional investors, such as MicroStrategy. They all count on the Fed to continue to devalue the USD. This will make more hedge funds invest in Bitcoin, turned off by negative yields from the bond market.
As a consequence, Bitcoin’s price should keep rising, with some corrections, well into the following year. And as long as this continues, Bitcoin mining will be profitable even on a minor, individual scale.
Lastly, if you want to build a mining rig out of retail PC components, or check the hash power of your current PC, you can use this calculator.
Is Bitcoin Mining Legal?
At the beginning of March, China’s central authorities instructed its provinces to cut wasteful energy consumption. As a result, Inner Mongolia, which is very rich in coal and gas, decided to ban all cryptocurrency mining. This represents a major setback for Bitcoin mining because this one province held more Bitcoin miners than the entire United States, at 8% of global mining.
By April 2021, Inner Mongolia will have to locate and shut down all cryptocurrency mining operations. Needless to say, new mining projects will also not be approved.
However, if you are wondering if Bitcoin mining is illegal, the answer is no. In fact, Bitcoin had never been banned in China, only ICO projects since 2017.
While it is true that China doesn’t like crypto exchanges to operate within its territory, Beijing Arbitration Commission (BAC) still views cryptocurrencies as virtual commodities. In other words, cryptocurrencies are sanctioned only when they are used as currencies. Overall, to the question, is Bitcoin legal, it is best to answer where it is illegal.
Top Countries Where Bitcoin is Legal for Mining
Only a few countries have made it explicitly illegal, and almost always on religious grounds.
Among them are Egypt, Algeria, Morocco, Pakistan, Nepal, Bolivia, and Ecuador.
For example, in a Muslim country like Egypt, the Grand Mufti had issued a religious fatwa (prohibition) on cryptocurrencies because they are a form of usury. From the same angle but a different socialist field, a country like Ecuador or Bolivia adopted the same approach.
Otherwise, in most of the world, including the US/UK, Bitcoin is treated as a commodity/property or crypto asset subject to capital gains tax. This would apply to non-fungible tokens (NFTs) as well. With this in mind, here are the countries best suited for Bitcoin mining.
Yes, despite the recent mining ban in one of its provinces, China’s cheap coal is still a godsend for Bitcoin miners. This is why almost 2/3 of all Bitcoin mining is occurring in China.
However, now that Inner Mongolia has set a ban precedent, one should see a migration of miners into more friendly countries. Still, when it comes to electricity maximization, it’s difficult to beat China with its average of 0.084 per kWh.
Unlike China, Canada checks all the boxes for a prosperous Bitcoin mining venture: electricity cost, regulatory stability, broadband internet, and cold climate. The latter greatly diminishes mining costs, because nature provides its own cooling for most of the year. Canada’s national average temperature in 2019 was merely 1 Celsius.
When it comes to electricity, there is hardly a more cost-effective energy source than hydroelectric power. Quebec, in particular, has an appealing electricity infrastructure, which is why it has already attracted many Chinese miners. Canada’s commercial electricity cost sits at around $0.11 per kWh.
Another country serving as a natural refrigerator, Iceland, is unique in many ways. It draws its energy from an endless supply of geothermal plants. Also performing as a tourist wonder, naturally escaping hot vapor powers huge turbines creating cheap electricity supply, at around $0.13 per kWh for commercial use.
Furthermore, Iceland is sparsely populated with one of the friendliest regulatory and political environments. With its average temperature of 1.75 Celsius, one could hardly wish for a superior, cost-effective cooling solution. And Iceland has one of the highest internet connectivity rates in the whole Europe.
In many ways similar to Iceland, this Northern European country fully embraces blockchain technology in whatever form it comes. Its average temperature is only slightly higher than Iceland’s, at 2.1 Celsius. Most importantly, its electricity cost for the commercial sector is also on the lower side — at around $0.11 per kWh.
Finland owes this to its energy infrastructure, mostly consisting of nuclear and hydroelectric plants, along with natural gas and biofuel.
In addition to having a relatively cold climate and low electricity cost at $0.17 per kWh, Sweden has one other huge advantage. The nation’s government treats Bitcoin as a currency, and is subject to the Finansinspektionen (Financial Supervisory Authority) regulations. The nation also has good internet connectivity.
With such a combo of factors, Sweden is a top choice for Bitcoin miners. Unfortunately, Sweden’s political, security, and economic stability continues to deteriorate due to unlimited mass immigration. Consequently, it is difficult to see it as a part of the developed world within the next ten years.
What the Future Holds for Bitcoin Mining
Many were anxious about Bitcoin’s third halving, as miners received drastically lower block rewards than when Bitcoin launched. Fortunately, such fears were unfounded. So far, this is Bitcoin’s longest bullrun that may still last for half a year.
Consequently, Bitcoin broke through multiple price resistances, almost on a monthly basis. This creates a rare window of opportunity for miners, reflecting their record-breaking earnings in February. One only has to account for four key elements to maximize Bitcoin mining on a larger scale:
- the cost of electricity
- high-speed internet
- cold climate
- favorable political climate and crypto-friendly legislature
Otherwise, retail Bitcoin miners largely depend on the availability of ASIC mining rigs. More precisely, how is their hash power balanced with their power consumption. Unfortunately, the demand for such computers keeps rising, just as Bitcoin’s price.