BitPatagonia, one of the largest registered crypto mining companies in Argentina, recently faced a 400% increase in its electricity bill as a result of a policy change affecting miners there, the startup's industrial director Pablo Holmes told CoinDesk.
BitPatagonia's mine is located in Tierra del Fuego, at the southernmost tip of Argentina, where the cold climate supports up to 22 crypto mining companies, local sources told CoinDesk. But the government is not happy about the mining companies' energy consumption. As a result, it imposed a 170% increase in the wholesale price of electricity in Tierra del Fuego in January, specifically targeting miners of digital assets.
The Argentine government, alarmed by increasing crypto mining activity, began an investigation in December to identify mining companies and measure their energy consumption. The goal, it said at the time, was for miners to "pay an energy price that corresponds to the cost of utilities, as it is unfair that they pay the price of a private user."
The Argentine government pays large subsidies to various companies that supply electricity and gas, lowering the final price to taxpayers. In February, the budget for energy subsidies increased by 207% compared to the same month in 2021, according to a report by the Argentine Association of Budget and Public Finance Management (ASAP).
At the same time, the country is running out of dollars to continue importing energy, as reserves averaged $38.5 billion in March, according to the Argentine Central Bank. Net reserves are $1.65 billion, and liquid reserves are $1.9 billion in the red, local investment firm Allaria recently reported.
The power subsidies are a great opportunity for miners who use the private rates, but not for registered mining companies that must pay industrial rates.
Holmes added that the government's control measures do not encourage companies and residents mining cryptocurrencies outside the radar of the AFIP tax collection agency to register with the government.
"No one is going to say they are illegally mining in commercial areas, offices or homes just because they receive a letter from a public office. That's like responding to a letter from the Central Bank asking if your address serves as a den [illegal currency exchange] for buying and selling dollars," he added.
Moisés Sorloza, Tierra del Fuego's energy secretary, said recently that the provincial government had collected data from registered farms, but he also acknowledged that there were "micro-exploiters" working in homes that had yet to be regulated nationwide.
He added that Tierra del Fuego's "outdated" electricity system "can't handle the increase in businesses that use a lot of energy.
Due to price increases and what it calls unfair competition between registered and illegal miners, BitPatagonia is considering leaving Argentina and setting up shop in other countries, Holmes said, without specifying a destination.
Santiago Miranda, CEO of CriptoLab, a crypto mining company registered in the central province of Córdoba, said the company pays the full electricity tariff, but the activity is still "very profitable."
However, when discussing illegal mining and attempts at regulation, he warned that "no one will provide information if there is no benefit to the taxpayer." CriptoLab is working with various provincial governments to create a "friendly framework that's not just for collecting."
Low prices, high costs
According to the Argentine data auditing organization Chequeado, a monthly household bill for 300 kilowatt-hours (kWh) costs $5 in Buenos Aires, but an average of $30 in the United States.
This difference is causing many Argentines to turn to crypto-mining and earn income in a foreign currency, while the Argentine peso is steadily depreciating and annual inflation is over 55%.
Without being registered as official miners, Manuel and Pedro - who asked not to give their full names to remain anonymous - are friends and businessmen who invested $16,000 five months ago to mine Ether in the center of Buenos Aires, the Argentine capital.
"With one day of mining, we cover the surplus we receive from the monthly electricity tariff for this activity," they said, indicating that they receive an income of $30 per day.
Regarding possible taxes or energy restrictions, the miners are not too concerned because "regulations are running behind the technology, which is always one step ahead."
Manuel and Pedro plan to recover their investment within 15 months. Although they have invested their earnings in cryptocurrencies so far, they plan to exchange them for fiat in one of the illegal exchange offices known as "caves," which are usually hidden behind traditional stores such as jewelry stores.
Lucía, who asked that her last name not be mentioned, began mining in January and noticed an alarming increase in her electricity price. Despite subsidies, the cost tripled from $8 to $25.
"When I received the electricity bill, I was worried. But I am confident about the long-term investment," she told CoinDesk. Having decided to mine Ether (ETH), she now plans to recoup her initial investment of $4,800 in eight months.
Lucía, Manuel and Pedro expressed concerns about the change in the Ether protocol, but still hope to recover their initial investment before Eth 2.0 comes into play.
A mainstream niche
Home crypto mining has become so widespread in Argentina that even mining influencers have come on the scene to explain to beginners how to acquire machines and make the necessary investments.
Valeria Frías has more than 12,000 followers on Instagram and receives requests daily. In her spare time, she assembles, configures and sells processing equipment for crypto mining.
Frías initially invested $20,000 in four devices and had recouped that amount after 9 months of mining Ether. Aware of the protocol change, she now plans to start mining other coins such as Ravencoin, Conflux or Ethereum Classic.
"We have a huge tax burden, and people are always looking for an activity that gives them profitability to maintain their standard of living, fight inflation or not fall below the poverty line," Frías said.
Among their clients, adults over 80 stand out, looking to earn extra income to supplement the average retirement salary, the minimum of which was $153 in April.
For Argentine retirees, mining can be an even more lucrative activity than for the rest of the population, as the government can subsidize between 60% and 100% of electricity bills.
Low pensions are not the only problem facing the Argentine economy. According to the latest report from the National Institute of Statistics and Censuses (INDEC), 37.3% of the population is below the poverty index.
"Many people have turned to mining cryptocurrencies because it's like an escape," Frias concluded.