Ethiopia Lures Chinese Crypto Miners

TDR Three Key Takeaways:

  1. Ethiopia has attracted Chinese Bitcoin miners due to its cheap electricity from hydropower, following China’s ban on mining.
  2. While allowing mining, the Ethiopian government is cautious, weighing economic gains against energy consumption concerns in a country with widespread electricity shortages.
  3. The future of Ethiopia’s role in Bitcoin mining is uncertain, facing environmental scrutiny and the industry’s inherent volatility due to fluctuating energy costs.

Have you noticed that every day, there are reports about miners facing difficulties in obtaining electricity from local governments in North America? Well, enter Ethiopia! Ethiopia has become a new hub for Bitcoin mining, particularly attracting Chinese companies in search of cheap electricity and a hospitable business environment. This shift comes after these companies were forced to leave China following the government’s ban on Bitcoin mining in 2021. The lure of Ethiopia lies in its low-cost power—among the cheapest in the world according to Bloomberg—and the opening of the Grand Ethiopian Renaissance Dam, which has significantly increased the country’s electricity production capacity, primarily from hydropower.

As Bloomberg reports, the presence of mining rigs near Ethiopian electricity substations signals the country’s rising importance in the Bitcoin mining industry, which consumes vast amounts of power and seeks regions with inexpensive energy. Despite this potential economic opportunity, Ethiopian officials remain cautious, balancing the benefits of foreign exchange earnings against the optics of heavy energy use in a country where many lack basic electricity access.

The Ethiopian government’s allowance for Bitcoin mining, while still prohibiting cryptocurrency trading, reflects its strategic engagement with China, which has invested significantly in the African nation. However, the Bitcoin mining industry, now valued at $16 billion annually, faces global scrutiny over energy consumption and environmental impact, with concerns that it contributes to global warming.

Bloomberg’s coverage also highlights the volatile nature of the Bitcoin mining business, where the cost of electricity can dictate as much as 80% of operating expenses. The Ethiopian government has reportedly struck deals with 21 Bitcoin miners, mostly Chinese, hinting at the country’s potential to become a significant player in the industry, possibly even rivaling Texas, which currently leads in global Bitcoin mining capacity.

Ethiopia’s entry into the Bitcoin mining space is a complex interplay of economic, environmental, and political factors. While it offers Chinese miners a respite with its cheap power and supportive government, the sustainability and long-term viability of this arrangement remain to be seen, as the industry continues to navigate the challenges of power availability, government regulations, and environmental sustainability.

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