The East Himalayan Kingdom of Bhutan is showcasing a powerful example of how developing nations could leverage Bitcoin mining to improve their economies and achieve economic growth.
On Sept. 16, onchain analytics platform Arkham Intelligence claimed it had detected and identified the first Bitcoin (BTC) address of Bhutan’s investment arm, Druk Holding and Investments. According to Arkham, DHI holds 13,029 BTC, 656 Ether (ETH) and some BNB (BNB) and Polygon (MATIC), amounting to approximately $780 million in total crypto holdings.
BREAKING: BHUTAN GOVERNMENT’S $750M BTC NOW ON ARKHAM
— Arkham (@ArkhamIntel) September 16, 2024
Bhutan’s Bitcoin holdings are now labeled on Arkham. These holdings come from Bitcoin mining operations carried out by the Kingdom of Bhutan’s investment arm, Druk Holdings.
Arkham is the first to publicly identify these… pic.twitter.com/a8ScUNJJ9F
This means that Bhutan’s crypto reserves account for over 26.9% of its $2.9 billion 2023 national gross domestic product (GDP), according to World Bank data.
Nations worldwide are grappling with overwhelming debt levels, facing economic strain as borrowing costs rise and fiscal challenges grow. The mounting debt crisis is sparking debates over the long-term sustainability of current economic models, especially in poorer countries relying on external loans.
Total debt liabilities issued by central governments as a share of GDP. Source: International Monetary Fund
Michael Saylor, founder and chairman of software and Bitcoin-proxy company MicroStrategy, explained during the Bitcoin 2024 conference in Nashville, Tennessee, how nations — especially those with significant debt — could use Bitcoin to solve their economic problems.
He proposed a strategy where indebted countries could reallocate their treasury reserves from assets like gold and bonds to Bitcoin, a long-term digital asset. By doing so, these countries could leverage Bitcoin’s growth potential to pay off debt and possibly achieve economic prosperity.
The World Bank classifies Bhutan, a small Asian nation with limited economic capacity, as a developing country. Countries in this category typically have a gross national income (GNI) per capita below $14,005. Most countries worldwide are in this category, and many could follow Bhutan’s example to address their national debt. Some potential candidates include Paraguay, Venezuela, El Salvador, Argentina and Kenya.
Paraguay: A renewable energy giant limited by politicians
Paraguay has taken steps toward regulating Bitcoin mining in 2024, mainly due to its abundant hydroelectric energy resources. The country’s low electricity costs and favorable climate have made it an attractive destination for cryptocurrency miners.
Joaquin Morinigo, also known as Criptoboi, co-founder of Bitcoin Paraguay, told Cointelegraph, “Paraguay has a unique position in the world because 99% of its energy is hydroelectric.”
Morinigo explained that Paraguay’s low energy demand cannot absorb all the energy produced by the hydroelectric dams, so the surplus energy eventually ends up being exported to Argentina and Brazil at “rock-bottom prices.”
“It’s not far-fetched to think that the Paraguayan government could stop selling the surplus and use it to mine Bitcoin, just like Bhutan did.”
Even though Paraguay is the largest power exporter in South America and among the 10 largest worldwide, politics and regulation have prevented the country from using its surplus energy for cryptocurrency mining.
Morinigo pointed out that the same political party has ruled Paraguay for over 70 years. He believes the ruling bureaucrats fail to fully understand Paraguay’s vast energy potential to build a profitable Bitcoin mining infrastructure.
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In 2022, Paraguay’s legislature approved a bill to regulate cryptocurrency mining to establish a clear legal framework for the industry. The bill required miners to register with government authorities and adhere to specific energy consumption standards, ensuring compliance while fostering the growth of crypto-related activities in the country.
However, former President Mario Abdo Benítez vetoed the bill, citing concerns over energy consumption and minimal economic benefits. Some lawmakers urged the government to consider the benefits of selling the surplus energy to local crypto miners instead of exporting it to Argentina and Brazil. Despite friction from lawmakers, mining operations have continued to grow, albeit in a regulatory gray zone.
Venezuela: Energy giant with stunted crypto adoption
Venezuela has faced severe economic crises, including hyperinflation and shortages of essential goods, and many citizens have turned to cryptocurrencies to protect their earnings from inflation.
Rate of inflation from August 2023 – August 2024. Source: Trading Economics
The country is rich in oil and natural gas, providing a cheap and abundant energy source for electricity generation, an important factor for Bitcoin mining’s proliferation.
Anibal Garrido, CEO of crypto assets self-custody firm BTC Techno, told Cointelegraph that if Venezuela used its natural wealth correctly, it could bring “our nation into a cycle of financial profitability and operational sustainability” in the Bitcoin mining sector.
“Venezuela shouldn’t only try to emulate Bhutan’s model, but to surpass it.”
However, due to the neglected infrastructure, the country suffers frequent power outages and electricity shortages, making it difficult for miners to function. The government has banned crypto mining in Venezuela to protect its weak power grid, shutting down and seizing several mining facilities.
Garrido believes Venezuela has failed to harness its energy potential to establish a national Bitcoin mining network “due to the lack of political will.”
The 2024 Global Adoption Index from Chainalysis ranks Venezuela among the top 20 countries for crypto adoption. Venezuela once had the potential to emerge as a true crypto nation, with the widespread use of cryptocurrencies for daily peer-to-peer (P2P) payments and the government’s creation of Petro, a national cryptocurrency pegged to the country’s oil reserves.
However, the Venezuelan opposition claimed Petro was a “null and void” project that was “tailor-made for corruption.” Eventually, the national Venezuelan cryptocurrency was shut down due to low adoption.
Venezuela is currently in political turmoil, with accusations of vote rigging surrounding the 2024 presidential election. Both Venezuelans and international observers are calling for President Nicolás Maduro to release the voting records to clarify the election’s outcome.
Should a new government take power, public institutions might revisit crypto adoption. Opposition leader María Corina Machado has proposed adding Bitcoin to Venezuela’s reserves, envisioning a new era under the leadership of Edmundo González.
Garrido highlighted that if Venezuela renews its efforts to adopt cryptocurrency, it “must be nurtured by a solid education in both the technical and theoretical aspects of managing this emerging industry.” Without proper knowledge and understanding, sustainable growth in the sector would be difficult.
El Salvador: A missed opportunity for crypto mining
El Salvador made history as the first country to make Bitcoin legal tender in 2021. Salvadoran President Nayib Bukele is an open Bitcoiner and is busy developing the country’s futuristic project, Bitcoin City.
El Salvador currently holds around 5,750 BTC, which it purchased using treasury funds. The country also mines Bitcoin using its natural geothermal energy from volcanic activity, but this comprises only a tiny part of its total BTC stash.
First steps...
— Nayib Bukele (@nayibbukele) September 28, 2021
🌋#Bitcoin🇸🇻 pic.twitter.com/duhHvmEnym
Despite Bukele’s bold efforts, Bhutan has discreetly gathered over twice as much Bitcoin as El Salvador by mining the cryptocurrency.
El Salvador has significant hydropower projects, but these are constrained by the relatively small size of its river systems. Given the country’s ample sunlight, solar energy presents a promising alternative. However, El Salvador already hosts a lot of solar power plants, and it has yet to integrate Bitcoin mining infrastructure with these facilities.
Argentina: Milei’s support for Bitcoin has yet to materialize
Argentina was once a wealthy country, but disastrous policies and the abuse of the money printer have plagued the country with chronic inflation, which has caused several economic crises in recent years.
The South American country has a high crypto adoption rate, as citizens have turned to cryptocurrencies to safeguard their earnings from a failing local currency. Vitalik Buterin, co-founder of Ethereum, claimed during his 2021 visit that the “Argentine crypto community is one of the largest I have seen in the world.”
Argentine President Javier Milei has praised Bitcoin as a means to return monetary power to the people. Once he took office, he kept supporting the use of Bitcoin, declaring that in Argentina, “there will be free competition of currencies, so if you want to use Bitcoin there will be no problems.”
Source: Javier Milei
Milei has permitted the use of cryptocurrencies as a means of payment in contracts, but he has yet to take meaningful regulatory steps, such as allowing citizens to pay taxes with cryptocurrencies — a common move in countries advancing crypto adoption. While the province of Mendoza has implemented this option locally, it has not been rolled out nationally.
Milei’s government has not announced plans to adopt Bitcoin as legal tender or establish a national Bitcoin mining network, unlike El Salvador. However, on May 27, Argentina’s securities regulator, the National Securities Commission and the National Commission of Digital Assets from El Salvador held a meeting to discuss crypto adoption and regulation in the two countries.
Argentina is an attractive country for crypto miners due to its energy subsidies, which make electricity cheap. The country is also rich in energy resources, particularly oil and natural gas. Additionally, Argentina has numerous renewable energy sources, such as hydropower, solar power and wind power.
Significant private investment has been made in the Argentine crypto-mining sector, but it has failed to attract as much investment as neighboring countries such as Uruguay.
Stablecoin giant Tether launched a mining venture in Uruguay in 2023, stating that the country can generate 94% of its electricity from renewable sources, including wind and solar.
With abundant renewable energy sources, Argentina is well-positioned to follow Bhutan’s model for integrating Bitcoin mining. The country could leverage its energy resources for this purpose, particularly under the leadership of Milei, who has expressed support for Bitcoin and has already implemented drastic measures to reform Argentina’s struggling economy.
Kenya: The new frontier for Bitcoin adoption in Africa
Many countries in Africa are positioning themselves as potential Bitcoin mining hubs cheap power from renewable energy sources become more available.
In May 2024, Kenya’s Ministry for Energy and Petroleum announced a partnership with Bitcoin mining giant Marathon Digital to exchange technical knowledge and research, policy ideas and investment strategies on the development of critical energy infrastructure.
Kenyan electricity generation mix in megawatts as of June 2023. Source: Ministry of Energy and Petroleum, the Energy and Petroleum Regulatory Authority
Kenya has vast potential for renewable energy production. According to the International Trade Administration, Kenya expects renewable sources to replace existing thermal plants as the African country moves toward a fully green grid by 2030.
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The Kenyan government has not always been welcoming to cryptocurrencies.
In 2016, the Central Bank of Kenya banned the use of cryptocurrencies in financial transactions but relaxed its position years later. In 2022, it implemented the Capital Markets Law, which regulated digital assets with a cautious but not overtly hostile approach.
With Marathon actively collaborating with the Kenyan government to discuss its crypto mining policy, the government might see the potential in adopting Bitcoin mining following Bhutan’s success.
Smaller nations can feel the effects of Bitcoin on their treasuries much faster than larger countries, whether by buying BTC or through mining. On Sept. 16, El Salvador announced it won’t need to acquire more external debt, with Bitcoin helping to partly achieve this goal.