Chinese Bitcoin Miners Make Ethiopia New Base

Ethiopia has become the new home for Chinese bitcoin miners, years after the government of China prohibited crypto mining and other cryptocurrency-related activities.

The decentralization characteristic and associated risks of cryptocurrencies have left many governments bothered about the potential negative impacts on their economies and investors. 

One such government is China. The world’s second most populous country was once the Bitcoin mining capital of the world until 2021. The nation’s leadership struggled for several years to control cryptocurrency’s popularity in its terrain and to keep it from devaluing and replacing its fiat currency. However, crypto adoption and bitcoin mining only continued to expand. 

This led to China banning and denying legal-tender status for cryptocurrencies in September 2021. Since then, the Chinese government has maintained a strict stance on cryptocurrencies and one cannot say for sure how cryptocurrency will develop anywhere there. 

However, according to Jin Jianzhi of the Shanghai Mankun law firm, the Chinese government has not – at least not yet – outlawed cryptocurrencies’ attribution as property or a commodity. 

Chinese Bitcoin Miners Pitch Tents in Ethiopia

Following the crypto ban by Beijing, Chinese Bitcoin miners have moved from country to country in search of cheap power and favourable regulations. 

Bloomberg reported on Thursday that Chinese bitcoin miners have found a new crypto haven in the Horn of Africa —Ethiopia— thanks to the country having some of the world’s lowest electricity costs. Moreover, Ethiopia’s friendly ties with Beijing also gave it a special appeal to Chinese BTC mining firms.

According to the report, cargo containers carrying stacks of powerful, energy-guzzling computers began appearing near electricity substations connected to the Grand Ethiopian Renaissance Dam last spring.

The country’s new generation capacity from the Grand Ethiopian Renaissance Dam (GERD), which is now filled, has elevated Ethiopia’s installed generation capacity to 5.3 gigawatts, with 92% of this capacity sourced from hydropower, a renewable energy source.

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At press time, Ethiopian Electric Power, the state energy utility, charges Bitcoin miners a fixed rate of 3.14 US cents per kilowatt-hour for electricity sourced from substations, a price expected to fall once miners connect directly to power plants.

The state power monopoly has already sealed power supply deals with 21 Bitcoin mining companies, including two Chinese companies, the update added.

Why is Ethiopia Accepting BTC Miners?

The positive development has placed Ethiopia on the frontline to become one of the world’s top recipients of Bitcoin mining machines.

Notably, Ethiopia is in dire need of foreign currency inflows to pay private creditors after defaulting on an interest payment agreement in December 2023. 

“The Ethiopian government permitted Bitcoin mining mainly because the companies pay in foreign currency for the electricity they consume”, Yodahe A. Zemichael, Deputy Director at the Information Network Security Administration said. 

However, to contain surging mining interests, the government has implemented a directive aimed at regulating ‘cryptographic products,’ including mining while the issuance of licenses remains in the works. 

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