Forbes reported last year that Bhutan had secretly built what was likely to be the world’s largest state-owned crypto mining operation. The World Bank now has put a price tag on the project: $539 million.
The scale of the investment has put a serious strain on the small Himalayan kingdom’s finances. That $539 million investment in chips capable of mining bitcoin was equivalent to a fifth of the small Himalayan nation’s total GDP.
Bhutan’s economy was still grappling with the impact of the pandemic and the total shutdown of its traditional cash cow – high end tourism (visa fees of $200 per day per visitor) when it embarked on this gamble. The World Bank confirmed Forbes reporting that government spending on its secret crypto project drained hard currency reserves and fuelled a current account deficit.
How Bhutan had financed this spending was a mystery until now. The World Bank stated in its report that the spending was bankrolled by its central bank buying three-year foreign exchange bonds from its sovereign wealth fund Druk Holding & Investments.
Those bonds are now a risk factor for the country’s economy, according to the World Bank. “There are significant uncertainties related to the bitcoin mining operation that could delay DHI’s loan repayment to RMA, which could constrain the country’s ability to strengthen fiscal and external balances in the short and medium term.”
The report also notes that the loans were not “adequately” disclosed in the sovereign wealth fund’s annual reports. Despite the scale of the gamble it warranted little more than a paragraph from Druk’s last annual report, and many of Forbes’ questions about the project to harness the kingdom’s hydropower plants to mine bitcoin went unanswered.
