The latest report suggests that Chinese Bitcoin miners have been moving their base to the African nation of Ethiopia amid the region’s remarkably low electricity costs and the crypto-friendly nature undertaken by the local government.

Despite maintaining a ban on cryptocurrency trading, Ethiopia embraced Bitcoin mining in 2022, aligning with its efforts to strengthen ties with China. Chinese firms, integral in constructing the $4.8 billion Grand Ethiopian Renaissance Dam, will supply power to these miners, underscoring the growing partnership between Ethiopia and China over the past decade.

Ethiopia Emerges as a Promising Destination for Bitcoin Miners

In the midst of a global pushback against the energy-intensive Bitcoin mining industry, Ethiopia has surfaced as an unexpected haven, offering a rare opportunity for cryptocurrency firms. With mounting concerns over climate change and power shortages, the $16 billion-a-year industry faces scrutiny in many parts of the world, making Ethiopia’s welcoming stance all the more attractive.

For Chinese companies, in particular, Ethiopia presents a unique opportunity. Once dominant players in Bitcoin mining, Chinese firms have encountered stiff competition from local rivals in Texas, the current epicenter of the industry. Ethiopia’s favorable conditions offer a chance for these companies to regain their footing in the sector.

However, the move also comes with significant risks for both the companies and Ethiopia itself. Previous attempts by developing countries like Kazakhstan and Iran to embrace Bitcoin mining were met with challenges when the industry’s energy consumption sparked domestic unrest. Speaking on this, Jaran Mellerud, chief executive of Hashlabs Mining told Bloomberg:

“Firstly, countries can run out of available electricity, leaving no room for miners to expand. Secondly, miners can suddenly be deemed unwelcome by the government and be forced to pack up and leave.”

Ethiopian Minorities Are Cautious

Ethiopian authorities are cautious regarding the contentious nature of Bitcoin mining. Despite recent increases in energy generation capacity, nearly half of the population lacks access to electricity, making the topic of mining sensitive. Nevertheless, it presents an opportunity for significant foreign exchange earnings.

Ethiopia has also emerged as one of the leading destinations for Bitcoin mining equipment globally, according to estimates from Luxor Technology, a mining services provider. Luxor’s Chief Operations Officer, Ethan Vera, noted that while their initial significant equipment shipments to Ethiopia occurred in September, the country has swiftly risen in prominence in the mining sector.

The state-controlled power utility has confirmed agreements to supply electricity to 21 Bitcoin mining firms. However, a majority of them are Chinese-owned, which underscores the foreign investment dominance in this sector within Ethiopia.

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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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