Ethiopia: An African Paradise For Crypto Miners?

Bitcoin hasn't had the best couple of months, but is well up on the lows of last year, and its cheerleaders are bullish.

I think we're seeing more long term holders. Bitcoin has a lot of value.

We can actually expect over one hundred K and pricing by end of year.

You can learn a lot from watching what the miners are doing. They've been investing, They've obviously been betting their businesses on the price of bitcoin going up, and it looks like they're about to win their bet.

With the renewed attention, focus has turned to mining of the token and the best places to do it. In years past, many cryptocurrency miners would have been investing in China, but that's not an option anymore.

Minu is us shutting down they computer is.

In twenty twenty one, the Chinese government called a crackdown on the cryptocurrency industry.

They said their own crypto related transaction will be considered illicit activity.

And that's how some crypto miners left China and moved their operations to places like Ethiopia, a stable economy, perfect weather conditions, and some of the world's lowest electricity costs. When we talk about crypto mining. It seems like Ethiopia has it all, but in a country with power scarcity and increasing climate change concerns, how viable is this industry Already?

The government started to receive a backlash from different people from the country, saying supplying power to the mining company is not right. Why half of the population doesn't have access to power.

I'm Jennifer's Abasaja. This is the Next Africa podcast, bringing you one story each week from the continent with the context only Bloomberg can provide. In this week's episode, Bloomberg reporter Fasika Tedessa speaks to us from Adis Ababab about whether Ethiopia is really primed to be the new crypto mining heaven. So how did Chinese miners set their hearts on Ethiopia. Let's bring in Fisica Tedesa joining us from

In twenty twenty two, the government has made a change in the policy in letting it coin mining companies to get registered and the start operating in Ethiopia. The second one is the ideal or favorable climate Ethiopia has for bitcoin mining, so basically bitcoin mining needs five to twenty five said, Whichitopia has.

What are the other reasons then Pasica.

Another benefit lies in the abundance electricity power in Ethiopia. So currently the country has a little over five thy two hundred mega out of energy, so we possibly of doubling that capacity in the coming few years once the Ethopian Grand Renaissance m which is the largest in Africa, becomes operational. The other major factor that attracted Chinese companies

And you would think it might make more sense to operate and mine in China, but how come they've chosen not to.

The reason given by the Chinese government was that bitcoin mining has impacts on the environment and also at the same time, cryptocurrency trading can be used for fraudulent activities and money laundering. So because of that, Chinese companies we're looking for a better place to work or to operate in Pasica.

You mentioned the environment. Bigcoin absolutely is an industry that consumes a lot of energy.

A single ledger entry and bitcoin consumes enough energy to power your house for almost to day.

What's a climate crisis? Surely being in Ethiopia, there are still a number of environmental concerns. So why then was Ethiopia so willing.

The government highly leads these companies to come to Ethiopia because the government can directly generate income in foreign currency. So the other part is from the investment perspective. Because of the deadly war that happened in the northern part of the country, most of the investors lost confidence in investing in to Okay. So these are the two major reasons that the government is allowing companies to come to topid despite the butlers and the environment.

What can you tell us about the bilateral relations between these two countries. There must be some political elements to this as well.

China stands as one of the major bilateral creditors to Ethiopia, and also Chinese companies are known for holding the first place in FDI or foreign investment flows into Ethiopia, and also several Chinese companies has held construction of the largest dam of Ethiopia and also they built the major railway that Connectsopia with Dawooty. They also built the major or the main airport of Ethiopia. This economic and political activity shows that there is a strong tie between Ethiopia and China.

So, Piska, earlier you mentioned the dam and how China helped build it. The four point eight billion dollars dam, and it's one of the largest on the continent, as you mentioned, can you talk to us about its significance, especially when we think about that dam in relation to now what's happening with bitcoin mining.

Yes, Jennifer, as you said, it's one of the largest dums in Africa. Is the capacity of generating five two hundred megallards of energy. So the government highly relies on this term since it will help the country to boost its power generating capacity with the aim of exporting more power to never in countries including Djibouti, Sudan, Kenya, and also they are planning to move sell power to Tanzania.

So how can Ethiopia grow an industry that needs intensive power. Well, half of its population doesn't actually have access to electricity. That's after the break welcome back. Fifty percent of the Ethiopian population and live without electricity. So it feels a bit contradictory to then bring something that is power intensive into this country. How do you explain that?

Yeah, that's right. Basically, the government is trying to give to justification. One, they say that they can't generate additional income by sailing power to bitcoin mining companies, so that they will build transmission lines and enable the people that are not connected to power to get more power supply. So that's one of the justification that government is giving.

Is there any evidence that that's actually happening, that this deal and the miners are not actually affecting local supply. Do we have any indications at this point whether or not it's having an impact? Maybe is it just too early to tell.

Now the companies signed the power perponse agreement with the government, a few of them have imported the marsionaries they will be using for mining and the installation process, so not many of them started operating, so it would be hard to say the power supply or the power demand has been affected by this company, so it's a bit too early.

So then Fasika, what's the benefit here for Ethiopia? You walked us through a lot of the different reasons as to why China is looking to this country. But on the contrary, what's in it for Ethiopia.

One of the significant advantages is revenue generation from the sale of power, so which the country will be getting paid in dollars, So this will help severe for its crunching that in the economy. Okay is exporting commodities that is not more than three point one billion dollars a year while the import value is three times hired, so this will help the country to get more income in foreign currency.

A succession of developing countries like Kazakhstan and others initially embraced bitcoin mining, only to then turn on the sector when they realized its energy use actually threatened to fuel discontent among its population. I mean, is that something that could also happen in Ethiopia.

Yes, there are risks. The first one is the country's stability, So considering the nature of bitcoin mining, which requires intensive power supply and the capital in most of the power substations are located in CONFLICTWN areas, so.

That's right physica. For context, it's important to note the civil war that happened in Ethiopia back in twenty twenty and just how recent that was.

The conflict between the Tagrii region and its political entity that to Grive People's Liberation Front and the Ethiopian government run by Prime Ministers Abby Ahmored began on November four after the Prime Minister accused the tpof of attacking a federal military base.

We estimate that two point three million people are in urgent needs of humanitarian assistance in Tiger, including one point three million additional people due to conflict, and.

He still was broken by the African Union in twenty twenty two, so the country is relatively stable now, even though there are conflicts in different parts of the country. Another risk arises if there is a persistent backlash and an increase in local demand. This could be potentially leaved to a change in the government's policies because, as I previously mentioned, half of the population currently experiencing blackout conditions and at some point the government will leave to provide

Thanks so much to Fasika, a reporter from Addis Ababa, for your insight and your reporting there. As Fasika mentioned, bitcoin mining is a risky gamble for both Ethiopia and the companies alike. Is there sufficient enough energy for mining to expand in the country and give miners that competitive advantage that they're seeking, but also is it even going