Secret Bhutanese Crypto Mining Facilities Location Unveiled
One of the recently discovered crypto mines in Dagana Pass, Bhutan as part of the Forbes investigation. Source: Planet Labs PBS
In late November, Forbes Magazine used satellite imagery to uncover four previously undisclosed state-run Bitcoin mining facilities in Bhutan. The locations include Dochula Pass, a sacred region home to 108 shrines for fallen Bhutanese soldiers, the town of Trongsa, the Dagana district, and Education City – a failed megaproject designed to create an educational hub in the region.
The bankruptcies of major crypto exchanges BlockFi and Celsius were the first indicators that the Bhutanese government was investing in crypto. Court documents revealed that Druk Holding and Investments (DHI), the investment arm of the Bhutanese government, was a client of both exchanges. Specifically, Bhutan withdrew $65 million from Celsius and liquidated $76.5 million from BlockFi shortly before its collapse.
According to further reports by Forbes Magazine, DHI has connections to FTX and Voyager, other major crypto exchanges that went bankrupt this year. A government spokesperson confirmed earlier this year that the Bhutanese government had begun investing in Bitcoin back in 2019, when the price of one Bitcoin was $5,000 USD. Investing directly in crypto violates DHI’s constitutional mandate, which only allows it to invest in companies.
Due to its mountainous Himalayan geography, giving rise to numerous rivers, Bhutan benefits from high amounts of hydroelectric power reserves. The power reserves comprise 14% of Bhutan’s GDP and supply electricity to nearly all its residents. This source of cheap renewable electricity made Bhutan especially conducive to crypto mining.
Most countries need to invest heavily into their power grids to make crypto mining, which is extremely energy intensive. Bhutan’s surplus of cheap electricity allows it to simply redirect some of its energy towards mining facilities. Bhutan is looking to further expand its crypto mining industry, with Bitcoin mining company Bitdeer announcing a $500 million joint fund with the DHI to build mining facilities in the region in May 2023.
Tala Hydroelectric Power Station: the biggest hydropower station in Bhutan. Source: Pragsl/Wikimedia Commons
The Bhutanese cabinet approved the construction of Education City in 2010. However, controversy surrounded the project. The company contracted to build it, Infinity Techno Parks, had no prior experience in the education space and lacked the expertise to build it. Coupled with other corruption scandals that emerged surrounding the project, it was canceled in 2015. The Bitcoin mining operation that took its place took advantage of the prebuilt infrastructure to sustain itself.
Bhutan’s failed Education City is an indicator of the country’s larger economic woes. Due to it being a tourist-dependent economy prior to COVID-19, Bhutan was hit particularly hard by the pandemic, with their overall GDP falling 10%. Foreign exchange reserves are also shrinking.
With a youth unemployment rate of 28%, many young Bhutanese are emigrating abroad to Australia for hope of a better future. The government hopes that crypto will increase job opportunities and serve as a valuable form of excess reserves. Already, the government is putting its crypto reserves to use by increasing public servants’ pay by 50% in 2023.
Despite the apparent promise crypto mining holds for Bhutan as a lucrative industry, there are still concerns. During the Asian monsoon season, Bhutan often experiences droughts, which leave its hydroelectric dams at a standstill for around three months. Bhutan usually imports electricity from neighboring India at this time. However, Bhutan’s crypto mining project relies on a constant supply of clean hydroelectric energy. How it will sustain its mining operation through these months remains to be seen, partly because of the Bhutanese government’s secrecy.