According to local media reports, Bhutan has been secretly executing Bitcoin mining operations for a very long time. In particular, the largest and only government-owned holding company Druk Holding and Investments (DHI) has confirmed the mining operation.
Notably, the country has immense stores of hydroelectricity accounting for 30% of the country’s gross domestic product, and fueling the homes of nearly all of its 800,000 residents. However, for the past few years, Bhutan’s royal government has been quietly devising a new use for these reserves: powering its very own Bitcoin mine.
A government official confirmed to the media that the government had begun mining “a few years ago as one of the early entrants when the price of Bitcoin was around USD 5,000.” It explained that the earnings go towards subsidizing power and hardware costs.
Additionally, DHI confirmed that it has been mining Bitcoin for several years as part of its diversified portfolio. The officials assured that the risks associated with cryptocurrencies are mitigated, considering that the company is not involved in direct selling and buying digital assets.
At the same time, DHI noted that the investment pays for itself by selling Bitcoin to cater to the mining operational costs. It also clarified that the investment in Bitcoin mining is a strategic move rather than driven by the fear of missing out (FOMO) on the technology. As part of this strategy, DHI is assembling a team of experts in cryptocurrencies and harnessing the benefits of regulated cryptocurrency exchanges worldwide.
Bhutan is also in negotiations with Bitdeer, one of the world’s largest bitcoin miners which is listed on the Nasdaq as confirmed by the firm earlier this month. The firm revealed to investors in a stock market update that it was in talks to secure access to 100 megawatts (MW) of power for a bitcoin mining data center in Bhutan, slated to break ground this quarter.
The information on Bhutan’s crypto agenda came after the news of Bhutan spending several years cultivating a significant crypto portfolio was brought to public attention. As reported by Todayq News, Bhutan’s Druk Holding & Investments, covertly poured millions of dollars into crypto holdings, which were exposed by the bankruptcies of lenders BlockFi and Celsius.
It also raised concerns about transparency as while these investments were made through a sovereign entity created to manage the country’s wealth on behalf of its people, the citizens were never informed.
Moreover, rumors of government-backed Bitcoin farms spread across the country in recent years. A Bhutanese citizen told the media that they believed there were “mostly experimental” projects underway. In addition, Druk staff listed their responsibilities on LinkedIn as operating and managing “crypto mining farmhouse” and Bitmain-made mining rigs.
According to customs data, the number of chips Bhutan has imported also skyrocketed in recent years. As a result of this, international supporters have cautiously observed Bhutan’s growing crypto advocacy and voiced concern that the $193 million spent on computer chips. It also fueled a yawning trade deficit and tallied with a sharp drop in the country’s foreign currency reserves. Quoting a former international advisor, who asked not to be identified:
It’s concerning that Bhutan’s resources have been invested in a secretive manner in a highly volatile and risky investment which has a big environmental burden.
Bitcoin mining has increasingly become an industrial operation, frequently relying on specialized chips from Chinese companies like Bitmain or Nasdaq-listed Canaan. These mining rigs are often bundled together into vast energy-hungry data centers. China’s move to ban crypto activities in 2021, as well as moves in Kazakhstan and Sweden to limit or tax Bitcoin miners, have forced many operations to find new homes with cheap sources of electricity.
The United States, Norway and further flown destinations like Paraguay, which also has immense hydropower capacity, have drawn hoards of miners. Still, several of the largest mining operators like Core Scientific and Compute North filed for bankruptcy after Bitcoin prices plunged and energy prices soared in the last year.
Sources reveal that the Singapore Bhutan Association, a club of Chinese, and Singaporean businessmen, and a member of Bhutan’s royal family, fronted one proposal to run bitcoin miners out of shipping containers. The scheme promised royal support and cheap energy to investors willing to spend up to $800,000 on shipping containers kitted out with a 700-kilowatt mining rig.
Dasho Ugen Tsechup Dorji, an uncle of Bhutan’s current king, said the project was currently on hold. He added that the government “have not approved the private sector to get involved in this business.” Analysts have also voiced concerns about Bhutan’s suitability for large-scale mining operations.