Bhutan turns to crypto in search of fast growth

Background

Druk Holding & Investments (DHI), the state-owned commercial holding company of Bhutan, has embarked on an ambitious plan to raise up to $500 million for a crypto mining business. In collaboration with Bitdeer, a prominent Singaporean bitcoin mining group, DHI aims to attract international institutional investors for funding. Despite the volatility, controversies, and scandals that have plagued the crypto sector, Bhutan is placing its bet on this emerging industry, following the footsteps of countries like El Salvador and the Central African Republic.

The Drive for Technological Innovation

Ujjwal Deep Dahal, CEO of DHI, envisions the tech push to accelerate innovation within Bhutan's predominantly rural economy. In addition to crypto mining, DHI has embarked on an early-stage project involving drones in the power sector. Furthermore, the company recently introduced a biometric digital identity system. By focusing on these new-generation industries, DHI aims to solve existing challenges, foster industry creation, and develop a diversified portfolio of investments.

Bhutan's Unique Strengths

The core portfolio of DHI, which boasted approximately $3 billion in assets in 2021, comprises major telecom, power, and aviation companies, among others. Bhutan's mountainous terrain provides an abundance of hydropower resources, a vital industry for the country. Proponents argue that hydropower offers a renewable and easily accessible electricity source for energy-intensive bitcoin mining. Bhutan's commitment to environmental conservation is exemplified by its status as one of the few carbon-negative nations globally, absorbing more carbon than it emits.

Economic and Political Context

Having transitioned from an absolute monarchy to a democracy in 2008, Bhutan has maintained an average annual growth rate of 7.5 percent since the 1980s, as reported by the World Bank. While the country heavily relies on trade with neighboring India, it is exploring avenues to diversify its revenue streams. The rise of bitcoin mining presents an opportunity for Bhutan to tap into alternative sources of income, potentially boosting economic growth. Bhutan's pursuit of sustainable development is evident in its implementation of a unique Gross National Happiness (GNH) metric, which prioritizes well-being over mere economic growth.

Jaran Mellerud, an analyst at Hashrate Index, highlights the potential for Bhutan to diversify its revenue from hydropower through bitcoin mining. However, he expresses skepticism about the country's ability to raise $500 million amidst the industry's current turmoil. While mining is considered the least risky aspect of the crypto sector, both DHI and Bitdeer have encountered challenges. Bitdeer experienced significant losses, and DHI's involvement with bankrupt lenders and cryptocurrencies raised concerns. Nonetheless, DHI remains committed to the mining sector, emphasizing its relative safety.

Drone Technology for Infrastructure Maintenance

Beyond crypto mining, DHI is piloting a project that utilizes drones for inspecting and maintaining infrastructure in the power sector. Bhutan's rugged terrain poses challenges for drone operations, making it an intriguing space for drone researchers to test their capabilities at high altitudes.

Conclusion

Bhutan's foray into cryptocurrency represents a significant shift in its economic and technological landscape. By capitalizing on its environmental resources, embracing innovation, and venturing into the crypto industry, Bhutan seeks to drive economic growth, diversify revenue streams, and position itself as a forward-thinking nation. While challenges and uncertainties remain in the crypto sector, Bhutan's exploration of this new frontier demonstrates its willingness to embrace change and leverage emerging technologies for the benefit of its citizens and the nation as a whole.