Bhutan turns to cryptocurrencies in search of rapid growth

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Bhutan is investing in everything from bitcoin mining to drone technology as the tiny Himalayan kingdom is targeting new-age businesses looking for quick growth and returns.

Druk Holding & Investments, the state’s commercial holding company, this month will begin offering investors to raise up to $500 million for a crypto mining business after partnering with Singapore-based group Bitdeer, one of the largest bitcoin miners in the world.

Bhutan’s bet on cryptocurrencies, which follows that of other countries such as El Salvador and the Central African Republic, arrives despite the sell-offs, contagion and scandals that have rocked the sector. The isolated country of 800,000 only allowed television and the Internet in 1999 and is known for its gross national happiness metric, which seeks to prioritize well-being over economic growth.

Ujjwal Deep Dahal, chief executive of DHI, said the technology boost would help accelerate innovation in the largely rural economy. DHI is also in the early stages of a project to deploy drones in the energy sector and launched a biometric digital identity system in February.

DHI is “focusing on the next generation of industries,” he said. These technologies “would provide platforms to solve problems and also platforms to create industry and to create a diversified portfolio of investments for us.”

DHI’s core portfolio, which had assets of approximately $3 billion in 2021, consists of Bhutan’s leading telecommunications, energy and aviation companies, among others.

Together with Bitdeer, it will contact international institutional investors for funds. Bitdeer said it plans to build a 100-megawatt cryptocurrency mining data center in the country.

mountainous Bhutan it has abundant sources of hydroelectricity, a crucial industry in the country. The companies argue that hydroelectric power provides an easy, renewable source of electricity for bitcoin mining, an energy-intensive process in which computers solve mathematical problems to create new coins.

Long an absolute monarchy, Bhutan adopted a democratic constitution in 2008 and has experienced an average annual growth of 7.5% since the 1980s, according to the World Bank. The country, which depends on trade with neighboring India, is also one of the few carbon-negative countries in the world, meaning it absorbs more carbon from the atmosphere than it releases. High-end tourism is a major source of revenue, with visitors paying a levy of $200 per day.

Jaran Mellerud, a Norway-based analyst at bitcoin mining data provider Hashrate Index, said bitcoin mining could help Bhutan diversify its hydropower revenues, most of which are exported to India .

Bhutan could become “the largest bitcoin miner per capita in the world,” he said.

But he expected the country to struggle to raise $500 million due to turmoil in the industry. “In 2021, every week a miner was making $50 million, $100 million,” Mellerud said. “Now it’s big if a miner is able to raise $50 million. . . So $500 million in a bear market for a bitcoin mining operation? I think it’s a bit much.”

Both companies have been exposed to the cryptocurrency turbulence. Bitdeer suffered heavy losses last year and its Nasdaq-listed shares have dropped by about a third since it went public via a special purpose acquisition vehicle last month. Forbes reported last month that DHI held tens of millions in cryptocurrencies with bankrupt lenders BlockFi and Celsius, though DHI has denied losing any money in the business.

Dahal argued that mining was the safest part of the industry. “We stick largely to mining which appears to be the least risky vertical.”

Mellerud warned that miners were still “extremely affected” by the cryptocurrency bear market.

DHI is also piloting a project to use drones to inspect and maintain infrastructure in the country’s energy sector. DHI last year said it was in talks with Japanese drone company Sora to develop technology and even manufacture in the country. “Because we are in a very hilly terrain, drones find it difficult to fly,” Dahal said. “So it’s a very interesting space for drone researchers to test at 4,000 meters.”