Bhutan is investing in everything from bitcoin mining to drone technology as the tiny Himalayan kingdom turns to new era ventures in search of rapid growth and returns.
Druk Holding & Investments, the state-owned commercial holding company, will start offering investors this month to raise up to $500 million for a crypto-mining venture after partnering with Singaporean group Bitdeer, one of the largest bitcoin miners in the world.
Bhutan’s bet on crypto, which follows that of other countries like El Salvador and the Central African Republic, comes despite sellouts, 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 measure of Gross National Happiness, which seeks to prioritize well-being above economic growth.
Ujjwal Deep Dahal, chief executive of DHI, said the technology push would help accelerate innovation in the largely rural economy. DHI is also in the early stages of a drone deployment project in the electricity sector and in February launched a biometric digital identity system.
DHI “is focused on the next generation of industries,” he said. These technologies would “provide platforms to solve problems and would also provide platforms to create an industry and create a diverse portfolio of investments for us”.
DHI’s core portfolio, which had assets of approximately $3 billion in 2021, consists of Bhutan’s leading telecommunications, power and aviation companies, among others.
Together with Bitdeer, it will approach international institutional investors for funding. Bitdeer said it plans to build a 100 megawatt crypto-mining data center in the country.
Mountainous Bhutan has abundant sources of hydroelectric power, a crucial industry in the country. The companies say hydroelectricity 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 recorded 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 being charged a tax of $200 per day.
Jaran Mellerud, a Norway-based analyst at mining data provider Bitcoin Hashrate Index, said bitcoin mining could help Bhutan diversify revenue from hydropower, most of which is exported to India.
Bhutan could become “the largest bitcoin miner per capita in the world”, he said.
But he expected the country would struggle to raise $500 million given the turmoil in the industry. “In 2021, every week a miner was raising $50 million, $100 million,” Mellerud said. “Now it matters if a miner is able to raise $50 million . . . So $500 million in a bear market for a bitcoin mining operation? I think that’s a bit too much.”
Both companies have been exposed to turmoil in crypto. Bitdeer suffered heavy losses last year and its Nasdaq-listed shares are down about a third since listing via a special purpose acquisition vehicle last month. Forbes reported last month that DHI held tens of millions of cryptocurrencies with bankrupt lenders BlockFi and Celsius, although DHI denied losing any money in the transactions.
Dahal argued that mining was the safest part of the industry. “We largely stick to the mining sector which seems to be the least risky vertical.”
Mellerud warned that miners were “extremely affected” by the crypto bear market, nonetheless.
DHI is also piloting a project to use drones to inspect and maintain the country’s electricity sector infrastructure. DHI announced last year that it was in talks with Japanese drone company Sora to develop the technology and even manufacture it in the country. “Because we’re in very hilly terrain, the drones have trouble flying,” Dahal said. “So it’s a very interesting space for drone researchers to test at 4,000 meters.”