Author: FinTax

Frequent industry fluctuations: How crypto mining companies cope with challenges

The crypto mining industry in 2025 seems to be completely different from before.

In 2021, mainland China completely banned crypto mining activities, forcing a large number of mining machines to relocate, and the global computing power landscape suddenly changed;

In 2022, Ethereum completed its transition from PoW to PoS, marking the end of the traditional mining model for one of the largest public chains;

In 2024, Bitcoin will be halved, mining profitability will be tightened, and profit margins will be compressed year-on-year.

Faced with multiple challenges from policies, technology, and the market, crypto mining companies are forced to accelerate their transformation and seek new paths to survival and growth. To this end, crypto mining companies have made various external attempts: upgrading ASIC hardware to pursue higher computing efficiency; rebranding and expanding their business, transforming their identity from "miners" to "digital infrastructure providers" to enter the AI and high-performance computing markets; accessing capital markets and issuing computing power derivatives to enhance financing capabilities and stabilize returns; and signing long-term power purchase agreements (PPAs) and introducing cooling and operations optimization technologies to cope with energy pressures. Meanwhile, mining pools are continuously innovating in computing power allocation mechanisms, settlement transparency, and derivatives services to maintain their user base and cope with increasingly fierce competition.

While these transformations have undoubtedly effectively mitigated the impact of external risks, they cannot change the fact that the external environment remains fraught with uncertainty. Policies can change overnight, and energy and cryptocurrency prices are subject to constant fluctuations. At this time, it may be helpful to shift some of the focus from external factors to internal factors, exploring internal growth potential. In particular, by optimizing internal financial and accounting management capabilities and strengthening compliance and transparency, mining companies and mining pools can build their own defenses amidst the fierce external competition, solidify their current operations, and lay a solid foundation for earning the long-term trust of the capital market.

Overview of the pain points of financial accounting management for mining companies and mining pools

In reality, most crypto mining companies and mining pools face several thorny issues in their internal accounting management, such as:

Distorted profit accounting: While computing power output is distributed across multiple mining pools and accounts, costs such as electricity, depreciation, and site operations and maintenance are spread across different entities, making it difficult to match each transaction. The result is that while profits appear to be growing, the true gross and net profit margins are unclear, leaving companies with a lack of basis for decision-making.

Cross-border financial fragmentation: As computing power migrates to North America, Central Asia, the Middle East, and other regions, accounting standards vary across jurisdictions, leaving accounts scattered across various subsidiaries. Consolidating financial statements is time-consuming and labor-intensive, and prone to inconsistent reporting. This makes it difficult for management to present a unified and credible financial report when facing external financing or regulatory scrutiny.

Disconnect between business and finance: In mining pools, operational systems are responsible for recording hashrate allocation and user settlements, but financial systems often rely on manual import or Excel processing. Data delays and information asymmetry often lead to a disconnect between actual on-chain revenue and reported financial figures, impacting both internal management and external trust.

Compliance and audit pressures: With stricter tax compliance, companies are required to provide a complete and traceable chain of evidence for transactions. However, in reality, crypto mining companies often lack audit-friendly accounting systems, making it difficult to quickly prove asset ownership and cost bases. This can easily challenge a company's credibility and financing capabilities when dealing with regulators or the capital market.

A disconnect between management and strategy: Crypto mining companies tend to focus on expanding computing power and negotiating energy prices, while internal value management is often relegated to a "back-office situation." This leads to finance teams constantly struggling with reconciliations and reporting, preventing them from aligning their strategies and establishing long-term transparency and credibility in the capital markets.

Building a compliance moat by optimizing internal financial and accounting management

Faced with volatile external environments, crypto mining companies and mining pools will struggle to truly seize the initiative if they rely solely on computing power expansion or business transformation. To navigate these cycles, crypto mining companies and mining pools should consider establishing a more compliant and sustainable accounting management system. The core of this system is to ensure the authenticity, timeliness, and comprehensiveness of accounting data, ensuring that it truly reflects operational results, mitigating compliance risks while providing management with a reliable basis for decision-making.

First, profits need to be visible. Through automated data collection and reconciliation, companies can track computing power output and revenue on a transaction-by-transaction basis, accurately matching these with costs such as electricity, depreciation, and operations and maintenance. This results in verifiable gross and net profit margins, no longer based on rough estimates, providing a solid foundation for strategic decision-making. Without comprehensive accounting across different jurisdictions, entities, and currencies, a complete financial picture is difficult to form, hindering management's ability to respond promptly and accurately to financing, audit, and regulatory requirements.

At the same time, the integration of business and finance is also key to improving management efficiency. Mining pool operations, such as hashrate allocation, user settlements, and fund flows, often lag and are prone to distortion if they rely entirely on manual processing. Linking these events with financial data in real time will significantly reduce reconciliation costs, improve information transparency, and help earn the trust of partners and the capital market.

Furthermore, increasing compliance and audit requirements necessitate that companies be able to provide a traceable chain of evidence. Any missing link, from original transactions to complete reporting, presents potential risks. Audit-friendly accounting systems, however, can better prepare companies for financial disclosures, tax audits, and capital market due diligence. Ultimately, through automation and systematization, finance teams can be freed from tedious tasks like reconciliation and reporting, allowing them to focus on matters that create higher value for the company, thereby transforming the finance function from a "record-keeper" to a "growth enabler."