By Mark Hunter
1 day agoTue Feb 13 2024 10:37:59
Reading Time: 2 minutes
- Chinese crypto mining firms are shifting focus to Africa, especially Ethiopia, attracted by cheap hydroelectric power
- Bloomberg reports that Chinese companies make up the vast majority of licensed operators
- Ethiopia has to balance its new revenue stream with electricity access to its population
Chinese cryptocurrency mining companies are increasingly directing their attention towards Africa, particularly Ethiopia, due to the prevalence of cheap hydroelectricity. Bloomberg reported that Chinese firms, which have been seeking alternative investment destinations following China’s 2021 cryptocurrency ban, are now focusing on establishing mining operations within Ethiopia, which legalized Bitcoin mining in 2022. The growth of the industry could present a new line of revenue for the Ethiopian state.
19 Out of 21 Deals Are With Chinese Mining Companies
China’s government banned cryptocurrency mining, along with all other crypto activity, in 2021, which led to a mass exodus. Some relocated to Kazakhstan while Texas also became a haven for newer installations, but it seems that Ethiopia has become the new go-to country for Chinese miners: according to Bloomberg, the majority of the companies that have secured agreements with Ethiopia’s state-owned power utility are Chinese, totaling 19 out of 21.
These miners are attracted to the country due to its abundance of cheap hydroelectric power, which constitutes 92% of the country’s electricity supply, while Ethiopia’s moderate climate provides favorable conditions for mining operations, unlike regions such as Texas, where higher temperatures increase the costs associated with cooling mining machines.
Some miners have reportedly disguised their operations as other ventures, such as factories or agricultural projects, to gain access to electricity without official approval for Bitcoin mining from the government.
However, similar tactics employed in countries like Iran and Kazakhstan were met with shutdowns following government interventions. The potential for political instability in Ethiopia further underscores the risks associated with investing in the country’s mining sector, according to the report.
Ethiopia Presents Unique Opportunity
Despite these challenges, Ethiopia presents a unique opportunity for cryptocurrency mining firms amid global concerns regarding the environmental impact and energy consumption of the industry, valued at approximately $16 billion annually at current Bitcoin prices.
However, uncertainties persist over the new venture, with factors such as electricity shortages and political sensitivities posing significant risks to mining operations. Ethiopian officials are cautious about the controversy surrounding Bitcoin mining, given that nearly half of the population lacks access to electricity. Nonetheless, mining represents a potentially lucrative source of foreign exchange earnings for the country, which the country can ill-afford to turn down.
