Bhutan, a small country in South Asia, is making big waves in the crypto world.
The Kingdom, which populates roughly 770,000 people and lies between India, China and Nepal, just made headlines after one of its cities adopted a crypto reserve strategy. This includes bitcoin (BTC), ethereum (ETH), and Binance’s BNB token (BNB).
El Salvador has previously made bitcoin part of the country’s national reserve and several other countries, including the United States, are considering taking similar measures to strengthen its already robust economy.
But Bhutan could set an example for smaller countries, where making crypto part of their national reserve strategy could have an enormous economic impact.
“They are coming out guns loaded to show the world what’s possible in the digital asset space by bringing in foreign companies to help take advantage of the growing global interest in crypto as a whole,” said Phillip Shoemaker, executive director of Identity.com, a non-profit organization providing decentralized identity verification.
“I see this move as potentially triggering similar actions among other governments around the world, especially in smaller countries that are subject to the whims of foreign-exchange volatility and geo-political uncertainty,” he said.
According to a report by the World Bank in May this year, although Bhutan does have a fairly robust economy, downside risks persist as the country’s fiscal deficit is expected to widen. To ensure economic growth, it needs to attract more foreign investments, the report suggested.
Bhutan listened and acted by creating Gelephu Mindfulness City, the region that is adopting crypto as part of its goal of “mindfulness, sustainability, and innovation.”
“The special economic zone being created helps to attract foreign investment, so its accumulation of digital assets more generally could be really compelling at the international level,” Shoemaker said.
Bhutan was already well positioned for this move. The country has an estimated 24,000 megawatts of technically feasible hydropower potential, of which it has so far only developed about 7%.
“It gets so much electricity from hydro sources, after all, and it makes sense for them to lean into the mining aspect of it,” said Shoemaker.
Bitcoin mining requires enormous energy which has sparked concerns about the negative environmental impact of crypto mining. However, use of hydropower solves that problem as it is much more cost efficient and reduces miners’ carbon footprint.
In April 2019, the country started using its massive amounts of hydropower to start mining bitcoin, according to an article by Forbes. Today, the country owns over 11,000 bitcoin, worth roughly $1.1 billion, according to data on Arkham. This puts Bhutan among the top five countries to hold bitcoin in its reserves, according to BitcoinTreasuries data.
“Bitcoin mining, in particular, is such a good tool for leveraging various forms of renewable and stranded energy,” said Jagdeep Sidhu, Core Developer at Syscoin and President of the Syscoin Foundation. “I imagine that other governments are increasingly looking at Bhutan as an example of how to launch their own Bitcoin reserves, especially countries that have abundant sources of energy that could otherwise be wasted.”
