The Wall Street Journal: The small country of Bhutan bets on Bitcoin mining

Original author: Shan Li

Original text compiled by: Deep Tide TechFlow

Bhutan still relies on ancient traditions, which makes it an unlikely cryptocurrency pioneer.

Thimphu, Bhutan – This small Himalayan country, known for its magnificent scenery and national happiness index, has recently gained a new title: Cryptocurrency Pioneer.

According to the cryptocurrency platform Arkham, Bhutan currently holds Bitcoin reserves worth $1.3 billion, which is approximately 40% of the country's Gross Domestic Product (GDP). According to Arkham's data, this makes Bhutan the third largest holder of Bitcoin among governments worldwide.

Unlike major cryptocurrency-holding countries like the United States or the United Kingdom, Bhutan's wealth does not come from seizing criminal assets or purchasing on the open market. Instead, this secretive Buddhist nation has quietly been establishing Bitcoin mining operations since 2020, utilizing its abundant hydropower resources to "mine" digital gold.

"Bhutan's choice is evident in many ways," said Ujjwal Deep Dahal, CEO of Druk Holding and Investments, Bhutan's sovereign wealth fund, which implemented this project. "We view Bitcoin as a store of value, similar to gold."

Many countries are researching how to inject cryptocurrency into their financial systems. In March of this year, U.S. President Trump signed an executive order to create a national reserve for Bitcoin and other digital currencies.

Cryptocurrency experts point out that major countries hope to seize the initiative in the cryptocurrency field, similar to the dominant positions of New York and London in traditional finance. For smaller countries, this is also seen as a potential economic boost. In 2021, El Salvador boldly attempted to make Bitcoin a legal tender, although the use of this currency has not been widely adopted.

The CEO of Bhutan's Sovereign Wealth Fund, Ugyen Dorji Dhahal, has been closely involved in the establishment of Bitcoin mining farms.

Bhutan is a secluded Buddhist country.

However, betting on Bitcoin is not without risks for Bhutan. A drop in Bitcoin prices could seriously impact the government's finances.

Nestled between China and India, Bhutan, with a population of only 780,000, is an unexpected pioneer in the cryptocurrency field. The country still retains many traditions: government officials wear traditional clothing, and men often don a knee-length robe tied at the waist; the capital Thimphu has no traffic lights; archery competitions are a popular weekend pastime. Bhutan's first credit card transaction dates back to 2010.

Bhutan measures economic progress through the "Gross National Happiness Index." However, this country, known as the "Land of the Thunder Dragon" (named for the thunderstorms that often sweep through its valleys), has long struggled to expand its economy beyond hydropower, agriculture, and tourism.

Since the COVID-19 pandemic has caused a halt in the tourism industry, Bhutan's economy has become more difficult. In the past five years, about 10% of the country's population has emigrated overseas in search of better job opportunities.

"We are very poor," said Dr. Lotay Tshering. The urologist served as the Prime Minister of Bhutan from 2018 to 2023. He added, "Many people call Bhutan the happiest country in the world. We are not."

When King Jigme Khesar Namgyel Wangchuck, at the age of 45, sought ideas from officials on how to leverage technology to drive economic development, the idea of Bitcoin mining emerged, as he was nicknamed "Asian Elvis" for his handsome appearance.

It is not common for a sovereign nation to directly operate its own cryptocurrency mining business. However, Bhutan has the key conditions to achieve profitable mining: cheap electricity.

In order to mine new bitcoins, computers must solve increasingly complex mathematical problems. In the early days of Bitcoin, enthusiasts often used personal computers to generate new coins, but today large-scale mining requires servers that consume a huge amount of electricity. Miners typically choose remote areas with low electricity prices, such as Kazakhstan, to set up mining farms.

"Bitcoin in Bhutan is like a battery that consumes our excess electricity during the summer," said Dahal, the CEO of the sovereign wealth fund, who has researched blockchain technology as a personal interest for many years.

This plan was initiated in 2019 by the fund's R&D department. Dahar stated that he initially learned how to mine Bitcoin by reading materials online and watching YouTube videos. The team initially imported two computers for experimentation, but one night, the equipment overheated, triggering the office alarm, and they received an emergency call from security personnel at 3 a.m.

However, when the first mine was broken ground at the end of 2020, Bhutan was closing its borders due to the pandemic, making it impossible for foreign technicians to fly in to assist with the construction of the equipment. Dahal and four employees personally configured the machines and spent several months stationed on-site. According to officials, the first mine was located near Dochula Pass, where the temperature is cool and close to power transmission lines. Experts from Singapore and Malaysia provided technical guidance via phone.

Hydropower plays an important role in Bhutan's economy.

"Once you have these machines, you won't want to waste even a day of mining time," Dahal said.

Soon, this plan achieved success. According to officials, by 2022, Bhutan had completed the construction of four government-owned mines. Moreover, this progress coincided with a significant surge in Bitcoin prices, which skyrocketed from under $10,000 in 2020 to around $100,000 today.

Bhutan's Prime Minister Tshering Tobgay stated that the profits from Bitcoin have been sufficient to compensate for the decline in hydropower exports, which typically account for about 40% of the government's budget. The decrease in hydropower exports is due to the higher electricity consumption of Bitcoin mining.

In 2023, the government decided to sell $100 million worth of Bitcoin reserves to provide a two-year salary increase for civil servants.

"This salary increase is entirely funded by Bitcoin profits," Tobgate said. He added that if you only sell electricity, "you simply cannot obtain the necessary funds."

Bhutan's Prime Minister Lotay Tshering stated that Bitcoin mining has provided funds for salary increases for civil servants.

Bhutan is still exploring other profit-making methods related to Bitcoin. In 2023, the Singapore-based mining company Bitdeer Technologies announced a partnership with Bhutan to build mining farms. According to the agreement, Bitdeer funded the construction of two mining farms and received all Bitcoin revenue. In return, the company pays Bhutan's electricity bills in US dollars, which further enhances Bhutan's foreign exchange reserves.

The government remains silent about the specific locations and number of mining sites, which are managed by a company called Green Digital. According to officials and satellite images from Planet Labs, at least six mining sites are currently operational.

Dahal explained that confidentiality is to prevent "abuse, hacking, or other issues." He added that the project fully complies with the relevant regulations of Bhutan.

However, during the closed-door meeting, some officials expressed dissatisfaction with the transparency of the project and raised concerns about the final use of the funds. Many Bhutanese citizens were unaware of the country holding Bitcoin reserves even before local news reported on civil servants' salary increases.

Bhutan's economy relies heavily on tourism, so the COVID-19 pandemic has had a severe impact on the country.

Chencho Tshering, a 25-year-old analyst at the National Land Commission, stated that he initially found it hard to believe that a struggling economy like Bhutan could generate enough funds to offer him a salary increase of up to 65%. "I didn't know much about Bitcoin before, but it is indeed a means of diversifying our economy," he said. "That's quite clever."

According to officials, the government plans to hold Bitcoin reserves for the long term instead of liquidating them for government spending. Although there are no plans to establish new mining sites, the government expects to upgrade existing ones.

Bhutan is still trying to integrate cryptocurrency into everyday life. Last month, the government launched a crypto payment system that allows tourists to pay for flights, hotels, and visa fees using over 100 types of cryptocurrencies.

Former Prime Minister and current Governor of the Special Administrative Region responsible for regulating Bitcoin mining, Dr. Tshering, stated that cryptocurrency will be integrated into every aspect of the region. This region is known as "Gelephu Mindfulness City," and its strategic reserves will also include cryptocurrency. It is expected that cryptocurrency will be widely accepted within the city, which is also developing its own digital currency.

"Cryptocurrency is basically like salt in curry," Dr. Zelin described, "it touches every element of the curry."