Building a Compliance Moat through Optimizing Internal Financial Management

Written by: FinTax

Frequent Industry Fluctuations: How Crypto Mining Companies Face Challenges

The crypto mining industry in 2025 seems to be a world apart from what it was before.

In 2021, mainland China completely banned crypto mining activities, forcing a large number of mining machines to relocate, drastically changing the global hash power landscape;

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 faced a halving event, tightening mining profitability and compressing profit margins year-on-year.

Under the multiple impacts of policy, technology, and market, crypto mining companies have had to accelerate their transformation, seeking new paths for survival and growth. To this end, crypto mining companies have made various attempts externally: pursuing higher hash power efficiency through upgrading ASIC hardware; rebranding and extending their business to shift their identity from "miners" to "digital infrastructure providers," entering the AI and high-performance computing markets; enhancing financing capabilities and revenue stability by entering capital markets and issuing hash power derivatives; and signing long-term power purchase agreements (PPAs), introducing cooling and operational optimization technologies to cope with energy pressures, among others. Meanwhile, mining pools have continuously innovated in hash power allocation mechanisms, settlement transparency, and derivative services to solidify their user base and respond to increasingly fierce competition.

These transformations have undoubtedly effectively buffered the impact of external risks, but they cannot change one fact: the external environment is always full of uncertainties, policies can change overnight, and energy prices and cryptocurrency prices can fluctuate at any time. At this point, it may be worthwhile to shift some attention from the external environment to internal factors, attempting to explore the growth potential within the company. In particular, by optimizing internal financial and accounting management capabilities, strengthening compliance and transparency, mining companies and pools can establish their own moat in the fierce external competition, solidifying current operations and laying a solid foundation for gaining long-term trust in the capital market.

Overview of Financial Management Pain Points in Mining Companies and Pools

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

Distorted Profit Accounting: Hash power output is distributed across multiple pools and accounts, but costs such as electricity, depreciation, and site operations are scattered across different entities, making it difficult to match them transaction by transaction. The result is that apparent profits seem to grow, while the actual gross and net profit margins remain unclear, leaving corporate decision-making without a solid basis.

Fragmented Cross-Border Finances: As hash power migrates to North America, Central Asia, the Middle East, and other regions, accounting standards vary across different jurisdictions, and ledgers are scattered across different subsidiaries. Consolidated financial statements are both time-consuming and labor-intensive, and inconsistencies in standards are common. When faced with external financing or regulatory inspections, management finds it challenging to present a unified and credible financial report.

Disconnection Between Business and Finance: In the mining pool scenario, the operational system is responsible for recording hash power allocation and user settlements, but the financial system often relies on manual imports or Excel processing. Data delays and information asymmetry lead to frequent disconnection between on-chain actual earnings and financial figures, affecting not only internal management but also external trust.

Compliance and Audit Pressure: As tax compliance becomes stricter, companies need to provide a complete and traceable chain of transaction evidence. However, in reality, crypto mining companies often lack audit-friendly accounting systems, making it difficult to quickly prove asset ownership and cost basis. When facing regulatory bodies or capital markets, the company's reputation and financing capabilities may be challenged at any time.

Disconnection Between Management and Strategy: Crypto mining companies often focus their attention on hash power expansion and energy pricing, viewing internal value management as a "back-office task." This leads to financial teams being overworked with reconciliation and reporting, unable to solidify into strategic support, and unable to help the company establish long-term transparency and credibility in the capital market.

Building a Compliance Moat through Optimizing Internal Financial Management

In the face of severe fluctuations in the external environment, crypto mining companies and pools cannot truly take control by merely relying on hash power expansion or business transformation. If they want to move forward steadily through cycles, they should consider establishing a more compliant and sustainable financial management system. The core of this system is to ensure the authenticity, timeliness, and comprehensiveness of financial data, allowing financial data to accurately reflect operational results, reducing compliance risks while providing credible decision-making support for management.

First, profits need to be visualized. Through automated data collection and reconciliation, companies can track hash power output and earnings transaction by transaction, accurately matching them with costs such as electricity, depreciation, and operations. The resulting gross and net profit margins will no longer be based on rough estimates but will be verifiable results, providing a solid foundation for the company's strategic judgments. If ledgers across different jurisdictions, entities, and currencies cannot be comprehensively accounted for, it will be difficult to form a complete financial picture, making it challenging for management to respond timely and accurately to financing, auditing, and regulatory requirements.

At the same time, the integration of business and finance is also key to improving management efficiency. If the operational tasks of the mining pool, such as hash power allocation, user settlements, or cash flow, rely entirely on manual processing, they are often delayed and prone to distortion. If these events can be linked in real-time with financial data, it will significantly reduce the company's reconciliation costs, enhance information transparency, and also help gain the trust of partners and capital markets.

Moreover, the heightened compliance and audit requirements necessitate that companies provide a traceable chain of evidence. Any missing link from the original transaction to the complete report poses potential risks. If equipped with an audit-friendly accounting system, companies can better cope with financial information disclosure, tax inspections, and due diligence demands from capital markets. Ultimately, through automation and systematization, financial teams can be liberated from tedious tasks such as reconciliation and reporting, focusing on creating higher value for the company, thus transforming the financial function from a "recorder" to a "growth accelerator."

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