Bitcoin mining makes Bhutan the fourth-largest government holder of the cryptocurrency

The country began mining Bitcoins in April 2019, the country's sovereign investment arm, Druk Holding & Investments (DHI), confirmed to local newspaper The Bhutanese.

A small kingdom in the Eastern Himalayas, known for stunning landscapes, deep-rooted Buddhist traditions and a focus on Gross National Happiness (GNH), usually isn't a topic in the ArcՎ coins rolling over to a third of the country's GDP.

This positions Bhutan as a powerful player in the global cryptocurrency market, despite its small population of less than 800,000.

The Southeast Asian country began mining Bitcoins in April 2019, the country's sovereign investment arm, Druk Holding & Investments (DHI), confirmed to local newspaper The Bhutanese. At the time, the cryptocurrency was valued at around $5,000 per Bitcoin.

Since 2007, DHI has been working to diversify the country's economy and saw digital assets as a growth opportunity.

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Bhutan mines Bitcoins using its vast hydropower resources, treating the cryptocurrency like gold or property. This approach aligns with Bhutan's focus on sustainable development, as hydropower provides a renewable energy source for crypto mining.

However, as of 16 September 2024, its Bitcoin holdings had grown to $1.1 billion, rolling over to a third of the country's GDP. This increase was driven not only by Bitcoin's surging price but also by Bhutan's proactive strategy to expand its crypto holdings, showcasing a strong commitment to digital assets.

This move occurred as the Covid-19 pandemic dealt a setback to the tourism sector, impacting national revenue. At the same time, youth unemployment has risen, pushing many to seek jobs abroad. By investing in crypto, Bhutan hopes to diversify its economy, generate new income, and create job opportunities in the growing digital sector.

But Bhutan's crypto aspirations are not without their share of challenges.

Cryptocurrency prices are notoriously volatile, and sharp declines could have implications for the country's economy, considering its substantial Bitcoin holdings. A market crash could affect national assets significantly, raising concerns about financial stability. To mitigate such setbacks, the government will need strong risk management strategies.

Although focused on renewable energy, the environmental impact of crypto mining is a subject of ongoing debate globally. While Bhutan's hydropower is cleaner than coal-powered mining in other countries, large-scale Bitcoin mining still requires significant infrastructure and maintenance. There are concerns about whether Bhutan's reliance on hydropower for mining could affect its ability to meet domestic energy needs in the future.

Another important factor is navigating the global regulatory environment. Cryptocurrency regulations vary widely across countries, and Bhutan must maneuver carefully to comply with complex international policies, particularly anti-money laundering (AML) and counter-terrorism financing (CTF) rules.

Despite these hurdles, Bhutan's story offers valuable insights into how smaller nations can seize economic opportunities presented by digital assets.

Many developing countries face limited access to traditional financial markets and foreign investment. They are often heavily reliant on a few export commodities and vulnerable to global economic shocks.

In contrast, Bhutan's approach demonstrates how emerging economies can use technology to join global financial networks without depending on traditional banking intermediaries. This allows them to participate in new economic sectors and diversify revenue streams.

A key part of Bhutan's strategy is using its crypto reserves to fund future development projects. If managed effectively, the profits from Bitcoin mining and trading could be recirculated into infrastructure, education, and healthcare initiatives. This approach could bring long-term benefits to Bhutanese citizens, transforming the nation's digital wealth into real improvements in quality of life.

Moreover, Bhutan's foray into cryptocurrency fits into its broader vision of digital transformation. The country has been slowly integrating blockchain technology across different sectors, from public administration to financial services.

By including digital assets in its economic planning from the outset, Bhutan shows its willingness to innovate while staying true to its core values of preserving culture and the environment.