Ethiopia Emerges As New Safe Haven for Chinese Bitcoin Miners

According to the most recent report, Chinese Bitcoin miners are relocating their operations to Ethiopia due to the country’s exceptionally low electricity costs and the favorable attitude towards cryptocurrencies adopted by the local government.

Despite upholding a prohibition on cryptocurrency trading, Ethiopia welcomed Bitcoin mining in 2022 as part of its strategy to foster closer relations with China. Chinese companies, instrumental in the construction of the $4.8 billion Grand Ethiopian Renaissance Dam, will provide electricity to these miners, highlighting the deepening collaboration 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.