Nestled in the Himalayas, the Buddhist kingdom of Bhutan has been quietly building its Bitcoin reserves since late 2020. Leveraging its cheap and abundant hydroelectric power, the nation has established mining operations to accumulate what is often referred to as 'digital gold.' It has now amassed a substantial reserve of Bitcoin valued at approximately $1.3 billion, positioning itself as the world's third-largest national holder of the cryptocurrency. With this strategic move, Bhutan aims to transform into a hub for green digital currency.
Harnessing Hydroelectric Power for Cryptocurrency Mining
Renowned for its Gross National Happiness Index, Bhutan is now gaining recognition as a pioneer in the cryptocurrency space. Data from the crypto analytics platform Arkham reveals that Bhutan's Bitcoin holdings are equivalent to roughly 40% of its Gross Domestic Product (GDP). This significant reserve places the country behind only the United States and China in terms of national Bitcoin holdings.
Situated between China and India with a population of around 800,000, Bhutan's economy has traditionally relied on hydropower, agriculture, and tourism. The COVID-19 pandemic severely disrupted its tourism sector, leading to a period of economic stagnation. Over the past five years, nearly 10% of the population emigrated in search of better employment opportunities. In response, the 45-year-old King of Bhutan, Jigme Khesar Namgyel Wangchuck, consulted with officials on leveraging technology to revitalize the economy, which led to the initiative of Bitcoin mining.
Bitcoin mining is the process of adding new blocks to the blockchain and releasing new coins into circulation. It involves energy-intensive supercomputers solving complex mathematical puzzles. The key to profitability in this venture is access to inexpensive electricity—a resource Bhutan possesses in abundance thanks to its hydroelectric infrastructure.
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Establishing a Foundation for Digital Asset Growth
Bhutan's first Bitcoin mining facility broke ground near the Dochula Pass in late 2020, a location chosen for its proximity to the power grid and cool climate. By 2022, all four of the government-owned mining facilities were operational. Notably, this expansion occurred before the recent surge in Bitcoin's value, which saw its price rise from under $10,000 in 2020 to approximately $100,000 at the time of reporting.
The country's sovereign wealth fund, Druk Holding and Investments, has played a central role in this strategy. Its Chief Executive Officer explained that Bhutan views Bitcoin primarily as a store of value, comparable to gold. In 2023, the government decided to liquidate $100 million worth of its Bitcoin reserves to fund salary increases for public servants over the following two years.
Beyond accumulation, the nation is exploring ways to use its renewable energy resources to mine environmentally sustainable cryptocurrencies. This initiative is part of a broader plan to stimulate economic growth, create job opportunities, and reduce the brain drain of skilled workers leaving the country. Green cryptocurrencies are those mined using clean energy sources like hydropower, wind, or solar energy, rather than fossil fuels.
Frequently Asked Questions
Why is Bhutan investing in Bitcoin?
Bhutan sees Bitcoin as a strategic store of value and a means to diversify its economy. By using its existing hydroelectric power, the country can generate a new stream of revenue, especially important after the economic downturn caused by the decline in tourism.
How does Bhutan mine Bitcoin sustainably?
The country utilizes its extensive hydroelectric power infrastructure to run energy-intensive mining operations. This reliance on renewable water resources, rather than fossil fuels, allows it to mine Bitcoin with a significantly lower environmental impact, aligning with its green energy goals.
What does being a 'green digital currency hub' mean?
Bhutan aims to lead in the mining and use of cryptocurrencies generated through renewable energy. This involves creating a sustainable ecosystem for digital assets that minimizes carbon emissions and promotes environmentally responsible economic development.
What was the initial investment for Bhutan's mining operations?
The mining initiative began with the construction of the first facility in late 2020. The government strategically located its mining farms near existing power grids and in cooler climates to improve efficiency and reduce costs, building a total of four state-owned facilities.
How does Bitcoin benefit the average citizen of Bhutan?
The revenue generated from the national Bitcoin reserve is being used to support public services. For instance, a portion of the holdings was sold to fund salary increases for government employees, directly injecting capital into the local economy and improving livelihoods.
Is Bhutan's Bitcoin strategy considered high-risk?
Holding a volatile asset like Bitcoin as a national reserve does carry inherent market risks. However, Bhutan entered the market early and utilizes extremely low-cost energy, which may provide a buffer against price fluctuations. The strategy is viewed as a long-term investment in a new digital asset class.