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Bhutan, the peace-loving Himalayan nation, is generally associated with picturesque landscapes and a carbon-negative footprint. However, the South Asian nation now proudly boasts bitcoins worth $1.3 billion, an amount totalling 40 per cent of the country’s gross domestic product.
Cryptocurrency platform Arkham reports that this is the third-largest such stockpile held by governments around the world.
When did Bhutan’s crypto journey begin?
The journey began in 2020 when Bhutan, where cheap electricity is abundant, began discreetly establishing bitcoin mines.
The secluded Buddhist nation was eyeing to harness its hydropower.
Crypto experts note that larger nations aim to lead in cryptocurrencies, akin to New York and London’s dominance in traditional finance, while smaller countries view it as an economic opportunity.
For instance, in 2021, El Salvador made a bold move by adopting bitcoin as legal tender, though its use remained limited.
Challenges and risks for Bhutan
Bhutan may have long dominated the “national happiness index,” but the Land of the Thunder Dragon—named for its dramatic thunderstorms—has faced economic challenges, relying heavily on hydropower, agriculture, and tourism.
The Covid-19 pandemic severely impacted tourism, and over the past five years, 10 per cent of its population has emigrated for better job prospects.
It’s rare for a sovereign nation to operate its own crypto-mining operations, but Bhutan’s access to cheap electricity makes it ideal.
Bitcoin mining
Bitcoin mining involves solving increasingly complex mathematical puzzles to unlock new coins.
While early enthusiasts mined using home computers, modern large-scale operations demand servers consuming vast energy.
Miners have flocked to places like Kazakhstan for affordable power.
Wall Street quoted Ujjwal Deep Dahal, chief executive of Bhutan’s sovereign-wealth fund, as saying that Bitcoin acts as a “battery” for the country.
Bitcoin “acts as a battery for us, using up excess summer power,” he said.
Prime Minister Tshering Tobgay stated that Bhutan’s bitcoin reserves have more than offset the decline in hydropower exports, which usually account for about 40 per cent of the government’s budget.
Impact Shorts
More ShortsThe increased electricity consumption by bitcoin mines has reduced hydropower exports. In 2023, the government sold $100 million of its bitcoin holdings to fund civil servant pay raises for two years.
“That increase has been financed totally with bitcoins,” Tobgay said. If you just sold electricity, “you wouldn’t get anywhere near the amount that’s required.”