June 19, 2024
By Sharan Kaur Phillora
Ethiopia is emerging as an unlikely hotspot for Bitcoin mining as its cheap electricity and openness to the crypto industry attracts Chinese companies. The East African nation has inked power deals with 21 Bitcoin mining firms, 19 of which are Chinese, fueling a surge in mining activity.
Here’s what we know:
The mining boom follows Ethiopia’s evolving stance on cryptocurrencies. In 2022, the government banned crypto trading, citing risks like financial instability. However, months later, authorities required crypto firms to register, signaling a shift to regulation over prohibition.
Ethiopia’s appeal to miners lies in its abundant hydroelectric power that provides some of the world’s cheapest electricity rates. The state utility has agreed to charge mining companies just 3.14 cents per kilowatt-hour, far below rates in other major mining hubs like the United States.
“Ethiopia can bring in more foreign currency than coffee through crypto mining,” said Kal Kassa, CEO of local miner HashLabs Mining, referring to the country’s top export.
The mining deals allow Ethiopia to earn foreign currency from miners paying for electricity in U.S. dollars, providing a financial boost as the nation grapples with forex shortages. The Grand Ethiopian Renaissance Dam, nearing completion, will add over 5,000 megawatts of hydropower capacity.
However, critics warn that energy-intensive mining could strain Ethiopia’s grid, where nearly half the population lacks access to electricity. Analyst Mikael Alemu said the mining boom risks “exacerbating energy deficits” and neglecting development priorities.
Despite concerns, Chinese miners continue flocking to Ethiopia after a 2021 crypto crackdown forced an exodus from China. The African nation offers economic and political advantages, with ties between the countries strengthening over the past decade as Chinese firms invested billions in Ethiopian infrastructure like the Renaissance Dam.
“Ethiopia will become one of the most popular destinations for Chinese miners,” predicted Nuo Xu of the China Digital Mining Association.
The mining frenzy shows how developing nations are becoming crypto frontiers, capitalizing on cheap power while navigating uncertain regulatory environments. Ethiopia aims to leverage the mining boom to boost forex reserves and technological growth, though risks like energy strains loom.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
