Trump’s “Made in the USA” promise is impossible to keep

December 29, 2024

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Trump's "Made in the USA" promise is impossible to keep

(Bloomberg) — As Donald Trump prepares to fulfill a long list of campaign promises, the president-elect’s pledge to ensure all remaining bitcoins are “Made in the USA” may be one of the toughest to keep.

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Trump made the pledge in a post on his Truth Social account in June after meeting at Mar-a-Lago with a group of executives from cryptocurrency miners, companies whose massive, high-tech data centers do the work that facilitates transactions on the blockchain. For compensation paid in Bitcoin or other cryptocurrencies. The rally marked a major turning point in Trump’s transformation from a cryptocurrency skeptic to one of the industry’s staunchest allies.

“It’s a Trump-like comment, but certainly not in reality,” said Ethan Vera, chief operating officer of Seattle-based Luxor Technology, which provides software and services to miners.

Although it is widely viewed as a symbolic pledge of support, it is almost impossible in practice since blockchains are decentralized networks that no one controls or can be prevented from participating in the process. On a practical basis, the sector has become increasingly competitive with large-scale operations springing up around the world to capture a slice of the tens of billions of dollars in revenue the industry generates each year.

Russian oligarchs, Dubai royal families, and Chinese businessmen in Africa are among the latest competitors. Big money and access to huge amounts of energy prompt them to join this lucrative but energy-intensive process. About 95% of the 21 million bitcoins that will ever be created have already been minted, although maximum production is not expected to be met for about 100 years.

The Bitcoin mining sector in the United States has turned into a multi-billion dollar industry over the past few years as the token has seen massive price increases. However, the total computing power generated by US miners is well below 50%, and it is impossible for the entire network to be operated by local companies, according to industry analysts.

Although there is no public data indicating the sources of computing power from each region around the world, major cryptocurrency mining providers like Luxor tend to have a good view of the composition. They have more specific information about mining sites through their software that pools computing power to increase miners’ chances of getting Bitcoin rewards.

US mining companies, such as CleanSpark Inc. and Riot Platforms Inc., have turned to Trump’s support, counting on the former president to ease scrutiny of the environmental impact of the high-energy process, limit competition from abroad, and push back on what they see. As restrictive guidelines under the Biden administration. Trump’s support for cryptocurrencies helped generate about $135 million in campaign contributions during the last election cycle, the most of any single industry.

“President Trump campaigned on a vision of America remaining a global leader in the next frontier of technology, from cryptocurrencies to artificial intelligence,” Kush Desai, a spokesman for the Trump-Vance transition, said in a statement. “The Trump-Vance Administration will work with industry giants and unleash our talent and resources to ensure American leadership and innovation in every aspect of the cryptocurrency industry, from mining to end-use solutions.”

Despite the rapid expansion in the United States and the recent rise in the cryptocurrency market, economic sanctions imposed by the United States and rampant inflation in some emerging economies have motivated offshore mining companies to further ramp up their operations.

“There is huge growth coming in a few different markets,” said Taras Kulik, CEO of Synteq Digital, one of the largest PC brokers specializing in Bitcoin mining. Eastern European countries such as Kazakhstan are seeing more demand, and “sales in Asia, Africa and the Middle East are on the rise,” Kulik said.

Significant sales in Asia indicate an increase in Bitcoin mining activities in China following the government’s blanket ban on such operations in 2021. A softening of the stance on cryptocurrencies coming from Russia is also leading to a resurgence of the industry in the country, according to Kulik.

For some African and South American countries, the margins generated from Bitcoin mining are much larger compared to their counterparts in the United States. Cheap energy sources are spreading across Africa, with hydropower-rich Ethiopia one of the fastest-growing cryptocurrency mining hubs on the continent. Mining revenues denominated in US dollars have provided a way to keep local operators in countries like Argentina out of the inflationary spiral and preserve their savings.

Even American mining companies have begun expanding overseas as energy costs rise in states like Texas. Mara Holdings, the largest mining company by market value, has announced plans to form a joint venture with a local company owned by Abu Dhabi’s sovereign wealth fund. The project aims to build one of the largest mining farms in the Middle East.

Operations within the US aren’t entirely for local miners either. Many miners offer hosting services, where anyone from the US or abroad can purchase machines, pay for their running costs, and earn Bitcoin.

There are other headwinds that Trump risks bringing to US miners. The trade war with China is likely to raise the cost of Bitcoin mining machines, most of which are manufactured by the Chinese company Bitmain, especially given the fact that the machines are one of the main expenses for miners along with electricity. But for many miners, the benefits from Trump outweigh the harm.

“Trump is probably the best thing that could ever happen to Bitcoin mining,” Kulik said. “He’s a pro-energy and pro-economic growth kind of president.”

–With assistance from Stephanie Lai.

(Adds comment from Trump spokesman in ninth paragraph.)