Is it illegal or not to use cheap electricity for mining?

Cryptocurrency mining is legal in most countries. It is not illegal to use cheap electricity to mine cryptocurrencies, but it is illegal to use cheap electricity to mine cryptocurrencies.

South Korea's restricted development zones say NO to mining

In South Korea, the government provides cheaper electricity to locations such as chicken farms and factories in restricted development zones[1] to help struggling industries and support projects focused on innovative technologies. The government strictly manages electricity use in these areas and continuously monitors the flow of energy into buildings, factories, farms, and homes in these specially approved areas.

On April 19, police in South Korea’s Gyeonggi Province arrested the operator of a mining center in Namyang City. Further police investigations revealed that five cryptocurrency miners deliberately rented factories and chicken farms in protected areas of the city to obtain electricity at prices significantly below market prices.

In the Paju Restricted Development Zone, the five rented an 859-square-meter building and applied to the government to use it as a semiconductor factory. Over a period of 8 months, the group used 1,580 ASIC miners for mining, and later even hired more than 40 people and rented their ASIC miners for mining. Preliminary investigations showed that the group mined at least 760 Ethereum and a large amount of Bitcoin.

There are currently no existing laws or policies in South Korea that can be used to punish miners who mine in restricted development zones. Only small fines can be imposed on five people because they used the site for other business activities, but more serious penalties cannot be imposed at present. To prevent similar incidents in the future, local police have asked the Ministry of Land, Infrastructure, Transport and Maritime Affairs to draft and pass laws that prohibit cryptocurrency miners from taking advantage of areas with cheaper electricity costs.

New York State’s first mining ban

Residents of the lakeside city of Plattsburgh in northern New York State filed a formal complaint with police due to excessive use of cheap electricity by local miners. On March 18, local authorities in New York State asked a cryptocurrency mining plant in the area to stop mining.

However, Plattsburgh did not impose a permanent ban on Bitcoin mining. Instead, local authorities and residents issued a moratorium, stating that the region will not consider applications for commercial cryptocurrency mining for at least a year and a half. Bloomberg reported that the city could charge more than $1,000 per day if miners decide to use the region’s low-cost electricity to mine. Plattsburgh authorities said:

“The purpose of this local law is to promote the adoption of land use and zoning and municipal lighting department regulations that protect and optimize the city’s natural, historic, cultural and electrical resources.”

On February 15, another cryptocurrency mining farm was complained by telecommunications giant T-Mobile because its ASIC mining machines interfered with T-Mobile's 700 MHz frequency band, causing adverse effects on the communication network. The Federal Communications Commission (FCC) gave the mining farm 20 days to stop operations and move elsewhere.

Is it illegal or not?

Cryptocurrency mining is legal in most countries, even in China, which announced a total ban on cryptocurrency trading in September last year.

Mining is legal in most regions because it helps grid operators consume excess energy that they can’t provide to homes and businesses, so while local governments have tried to ban cryptocurrency mining in the past, it remains unrestricted in most countries.

It is also not illegal to use cheap electricity to mine Bitcoin or any other cryptocurrency. However, it is illegal to disguise cryptocurrency mining as a protected business in a restricted area to profit from cheap electricity that is only available to approved organizations and institutions. This is why South Korean authorities are drafting regulations to prevent mining farms from taking advantage of cities with cheaper electricity.