forbes.com
Blockchain intelligence firm Arkham revealed on September 16, 2024, that Bhutan's bitcoin holdings have reached $750 million. This represents approximately 27.9% of Bhutan's estimated 2023 Gross Domestic Product of $2.686 billion.
Notably, Bhutan's bitcoin holdings are more than twice the value of El Salvador's, which stand at $335 million, despite Bhutan having only about 12% of El Salvador's population (782,000 versus 6.336 million). The holdings come from Bhutan's own mining operations, which have ramped up dramatically since 2019.
Origins Of Bhutan's Cryptocurrency Strategy (2019)
Bhutan's venture into bitcoin mining began in April 2019, when the cryptocurrency was valued at approximately $5,000. The country's sovereign investment arm, Druk Holding & Investments, confirmed to local newspaper The Bhutanese that it "entered the mining space" at this time.
The kingdom leveraged its abundant hydroelectric resources to power its mining operations. Bhutan's rivers, fed by Himalayan glaciers which provide significant hydropower potential, with 23,760 MW identified as technically feasible, and hydropower accounting for 30% of Bhutan's GDP; notably, 99.5% of Bhutan's electricity came from hydropower in 2003, with per capita electricity consumption at 949 kWh that year, according to a study by Mr. Sonam Tshering and Mr. Bharat Tamang. To put this into perspective, the 23,760 MW of feasible hydropower could theoretically power over 17 million average American homes, or supply the entire energy needs of a city like New York twice over.
This abundant clean energy allows Bhutan to power large-scale bitcoin mining operations while maintaining its commitment to environmental sustainability.
Bhutan's decision to enter the cryptocurrency market was driven by economic necessity. The country faced declining tourism revenues and sought to diversify its income sources. The Covid-19 pandemic, which later severely impacted Bhutan's $88.6 million annual tourism revenue, further validated this strategic move. Bitcoin
Expansion Of Operations (2020-2021)
In 2020, as the global pandemic disrupted traditional revenue streams, Bhutan intensified its cryptocurrency efforts. Sources familiar with the matter told Forbes that senior Bhutanese officials began discussions with bitcoin miners and mining equipment suppliers during this period.In 2021, Bhutan's cryptocurrency investments expanded beyond mining. Court documents reviewed by Forbes showed that DHI had become a customer of crypto lenders BlockFi and Celsius, investing millions of dollars in digital assets. These investments, never publicly disclosed by Bhutan, were exposed during the bankruptcy proceedings of these lenders.
In 2021, Bhutan imported $51 million worth of computer chips, a significant increase from just $1.1 million in 2020.
December 2021 marked the beginning of construction on what appears to be Bhutan's largest mining operation. Satellite imagery shows that work began on a vast site located on the grounds of the defunct Education City project, a failed government initiative. This new facility, strategically positioned along the country's first paved road, was designed to leverage the existing infrastructure left behind by the abandoned education project.
Major Investments And Information Disclosure (2022-2023)
In 2022, Bhutan's commitment to cryptocurrency mining became evident through significant hardware investments. Customs data revealed that the country imported $142 million worth of computer chips, accounting for approximately 10% of Bhutan's total $1.4 billion inbound trade. These chips were classified under the same export label used by bitcoin mining rig manufacturers, primarily sourced from China and Hong Kong.
The scale of Bhutan's crypto operations remained hidden until April 2023, when Forbes published an expose revealing the kingdom's secret investments. The report uncovered Bhutan's multi-million dollar cryptocurrency portfolio and its entanglements with failed crypto lenders BlockFi and Celsius.
Following this revelation, in May 2023, Bhutan's DHI announced a partnership with Singaporean bitcoin mining giant Bitdeer. The two entities revealed plans for a $500 million "green crypto mining" fund, aimed at leveraging Bhutan's renewable energy resources for blockchain technologies according to Cointelegraph.
In June 2023, The Bhutanese reported that DHI was considering selling a portion of its bitcoin holdings to fund a 50% salary increase for government officials. This move, worth an estimated $72 million, was proposed as Bhutan faced an economic crisis with its foreign currency reserves dwindling to just $689 million, barely enough to cover 14 months of imports.
Expansion Of Mining Capacity (2023-2024)
On April 5, DHI and Bitdeer announced their intention to increase Bhutan's mining capacity sixfold, reaching 600 MW by the first half of 2025. This upgrade was aimed at offsetting the potential impact of the upcoming bitcoin halving event. Bitdeer's chief business officer stated that the planned upgrades would raise Bhutan's mining capacity by 500 MW, building upon the existing 100 MW facility in Gedu.
Current State And Future Prospects
As of September 16, 2024, Bhutan's bitcoin holdings have reached $750 million, making it the fourth-largest government holder on Arkham's platform. This positions Bhutan as a significant player in the global cryptocurrency market, especially considering its small population of less than 800,000.
bitcoin holdings and mining operations represent a new revenue stream, potentially offsetting declining tourism income and addressing the country's trade deficit. The government has considered using bitcoin to fund public sector salary increases, indicating its importance to national finances.
However, risks remain. The volatile crypto market could impact the value of Bhutan's holdings, and energy-intensive mining may strain the country's electricity grid. The Asian Development Bank forecasts Bhutan's economic growth will slow to 4.6%, underscoring the need for careful management of these digital assets.
Bhutan's recent launch of a decentralized digital identity app suggests a broader vision for blockchain integration beyond mining, signalling the kingdom's continued commitment to this technology.
Significance Of Bhutan's Experience For Other States
Bhutan's entry into bitcoin mining and cryptocurrency investments offers valuable lessons for other small nations:
- Countries can leverage natural resources, like hydroelectric power, for emerging technologies.
- There is potential for economic diversification, reducing dependence on traditional sectors such as tourism.
- Illustrates a model for quiet integration into the crypto space, avoiding unnecessary attention.
Bhutan combines government investments with public education on cryptocurrencies. A recent study by Drakpa, Lhamo, Wangmo, Jamtsho, Thaye, and Pelden published in the Universal Journal of Financial Economics examined the attitudes of business students in Bhutan towards cryptocurrencies. The results showed that 91% of respondents are aware of cryptocurrencies, with an overall awareness level of 5.2961 out of 7. Students demonstrate a positive attitude towards cryptocurrencies (5.024 out of 7) and a high intention to use them (5.244 out of 7), especially if they become available (5.41 out of 7).
The research also revealed that awareness and positive attitudes positively influence the intention to use cryptocurrencies. The authors note the Royal Monetary Authority of Bhutan's initiative to launch a financial literacy and FinTech certification program in 2021, as well as mentioning the King of Bhutan's speeches in 2019 and 2020.
Bhutan's experience demonstrates that small states can play significant roles in the global crypto market through a dual strategy of government investment and public education, serving as a model for others. However, this approach requires careful planning and risk management to be successful.