Illegal mining in Malaysia and its risks
Introduction
Illegal cryptocurrency mining remains one of the most serious problems for the Malaysian authorities. According to estimates by the state-owned power company Tenaga Nasional Berhad (TNB), between 2020 and August 2025, damages from mass electricity theft amounted to approximately RM 4.57 billion (about $1.1 billion). At the same time, TNB identified 13,827 premises involved in illegal mining, and electricity theft cases grew by nearly 300% between 2018 and 2024.
Systemic raids on illegal farms are intensifying: authorities use drones with thermal imaging cameras and ground police teams for detection. In this article, we will examine how illegal mining affects the industry, why it poses risks not only to the state but also to users, and the role of KYC/AML screenings in the fight against "dirty crypto."
What Is Illegal Mining and Why Is It a Problem?
How Do Illegal Farms Operate?
Power grid hacks are carried out through unauthorized connections, tampering with electricity readings, or the complete replacement of metering devices. This allows mining operations to run without paying for the use of the power grids. However, such methods require a significant volume of energy and often lead to overloads and infrastructure damage.
Key Risks
- Technical Issues: Damage or failure of transformers, power outages, and fires.
- Economic Damage: Legitimate consumers pay higher tariffs due to supplier losses.
- Legal Consequences: Equipment owners face arrests and property confiscation. Operations to detect miners show that many are located in rented properties where electrical networks are not accessible for regular monitoring. This is why the problem also affects homeowners and property managers.
The Role of AML Screening and KYC in the Fight Against "Dirty Crypto"
What Is AML Screening and How Does It Work?
AML (Anti-Money Laundering) verification is based on identifying suspicious transactions and addresses that may be linked to criminal activity. It helps to:
- Identify wallets involved in the laundering of crypto assets.
- Prevent interaction with addresses that have sanction labels.
- Block accounts if the sources of the cryptocurrency are suspicious.
Why Is This Important for Legitimate Market Participants?
Illegal mining requires "laundering" Bitcoin through P2P platforms, mixers, and exchanges. For honest market participants, it is crucial to avoid interactions with "dirty crypto" due to the risk of transaction blocks or regulatory actions.
How to Conduct KYC and Protect Yourself?
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For Miners and Investors:
- Before transactions, check the addresses of partners using specialized blockchain transaction analysis services.
- Document the origin of your assets.
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For Exchanges and Swappers:
- Implement strict KYC procedures: request identity documents and proof of income from users.
- Use automated risk monitoring systems.
How to Protect Yourself?
For Homeowners
- Monitor electricity consumption and watch for sudden changes.
- Install remote telemetry systems to track performance metrics.
- Respond to suspicious noise or high thermal radiation.
For Mining Farm Operators and Investors
- Enter into official contracts with electricity suppliers.
- Comply with fire safety regulations and consumption standards.
- Verify technical documentation before connecting to the network.
For Service and Infrastructure Providers
- Integrate thermal monitoring and leak sensors into the power grid.
- Train response teams to quickly eliminate illegal connections.
Conclusion
Illegal mining harms not only state resources but the entire crypto market by undermining trust. Transparency in operations, the implementation of KYC/AML screening, and compliance with regulatory standards are key steps that will help not only protect yourself but also maintain the sustainability of the industry.
To further explore the risks of illegal activities, we recommend reading the CoinDesk article on the creation of an air and ground task force in Malaysia:
https://www.coindesk.com/policy/2025/12/04/malaysian-forms-air-and-ground-task-force-to-shutdown-14-000-btc-mining-rigs.