June 7, 2023
By Anjali Kochhar
Bhutan’s involvement in crypto mining became the talk of the town when Forbes in April 2023, published a report, alleging that Druk Holding and Investments Ltd. (DHI), Bhutan’s national investment company, had purchased digital assets worth millions of dollars from two bankrupt cryptocurrency lenders – BlockFi and Celsius.
Bhutan currently enjoys a gross domestic product (GDP) per capita of USD 3,266 yet in terms of the actual GDP it is quite low at USD 2.54 billion as of 2021. Clearly, the government requires new sources of revenue generation. And surprisingly, a source has surfaced in the form of Bitcoin mining.
In fact, the country has been involved in Bitcoin mining for years, as confirmed by one of Bhutan’s local newspapers, The Bhutanese. The report confirmed Bhutan’s involvement in crypto mining and paved the way for certain other revelations.
Overview of Crypto mining
Crypto mining or in this context, Bitcoin mining is a complex computational process wherein, qualified miners are expected to solve complex puzzles encoded cryptographically i.e., ordinary text converted into unintelligible text and vice versa.
On solving the puzzle, the miner successfully guesses the number (or verifies a transaction in this puzzle) and gets to update it in the Bitcoin ledger, in exchange for a reward of newly-minted Bitcoins.
Now, the maximum number of Bitcoins that can be mined is 21 million. And so, there is tough competition to crack those complex puzzles.
Another aspect to note is that the number for verifying a transaction is guessed by the computer. And so, for Bitcoin mining, one needs to provide energy to fuel those computers. In the case of El Salvador, geothermal energy (or heat from the Volcanoes) was used for Bitcoin mining.
As for Bhutan, this energy requirement is reportedly being fuelled by their vast sources of cheap hydrothermal energy.
“This makes Bhutan one of the only countries in the world to publicly run a state-owned Bitcoin mine along with El Salvador. We had previously reported Bhutan had invested tens of millions with BlockFi and Celsius”, tweeted Ian Martin, Europe News Editor at Forbes.
Involvement of Druk Holding and Investments (DHI)
Established in 2007, DHI is the largest and singular government-owned holding company in Bhutan. Known as the commercial arm of the royal government, the firm manages existing and future investments of the country’s government.
Bhutan’s involvement in crypto mining became the talk of the town when Forbes in April 2023, published a report, alleging that DHI had purchased digital assets worth millions of dollars from two bankrupt cryptocurrency lenders – BlockFi and Celsius. Note that these transactions came to light when both bankrupt firms released their bankruptcy declarations.
Following the Forbes report, The Bhutanese reached out to the DHI. Following are some key points about Bhutan’s involvement in Bitcoin mining:
- As confirmed by DHI’s CEO Ujjwal Deep Dahal, the company “as one of its many diversified portfolios is also engaged in mining digital assets within Bhutan.”
- Most of the crypto mining focus is concentrated in a relatively safer digital asset Bitcoin with a smaller focus on Ethereum.
- The firm entered the crypto mining space a few years ago when the Bitcoin price stood at approx. USD 5000.
Note that the exact date for Bhutan’s crypto-mining inception was not specified in the local news report. However, based on the cryptocurrency’s past market values, the country could have entered this space in any of the three time-frames:
- October 2017 (approx. USD 5,752.01)
- November 2018 (approx. 5,504.17)
- April 2019 (approx.5,066.22)
Additionally, with respect to BlockFi and Celsius’s borrowings highlighted by Forbes, DHI was quoted saying, “Bhutan had borrowed some digital assets as a loan to make certain investments and everything has been paid back and settled with no dues.”
Concerns about Bhutan’s crypto mining initiative
Hydroelectricity accounts for 40 percent of total exports and 14 percent of foreign exchange reserves, according to the 2022 Annual Report published by the Royal Monetary Authority of Bhutan. Clearly, hydropower is a key driver of economic growth in the south-Asian country.
Crypto mining is hardly a cheap endeavour. The concern then remains whether the electricity generated by Bhutan’s hydro-projects is being utilised for crypto mining, compromising the needs of local people and industries.
DHI did provide clarification to counter this concern. The Bhutanese report quoted DHI stating, “priority of power supply is for domestic consumption, local industries and private sector and in fact, mining gets the last priority.”
Additionally, the DHI CEO was further explaining, “… in the winter months when hydropower production is low then the mining operation either shuts down its machines or even imports power if it is affordable in order to not disrupt the domestic consumers and industries.”
Currently, the country is facing a financial crisis due to a delay in Bhutan’s ‘10,000 megawatts’ electricity target from hydropower. And this clarification by the DHI CEO may not dilute the concerns. Rather, the investment arm’s plan to seek investors for a USD 500 million fund for crypto mining might only add to the concerns of the local people.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
