Bhutan Suggests Bitcoin May Be Able to Revive Its Economy

Bhutan is using Bitcoin to increase wages. It hopes this will entice younger generations to stay and revive its economy. We discuss this in the article below.

Bhutan is officially the happiest nation on earth. Its citizens are content and well cared for. Yet this has been backed by a fairly stable economy, which is now under threat. The country is having issues retaining young talent and innovation. To solve this issue, it believes Bitcoin may be the answer.

Bhutan’s Bitcoin Plan

Over the past few years, the country has been one of the most prominent miners of Bitcoin. Where other countries have struggled to keep up with rising energy costs when mining, it has harnessed its hydropower plants to supply the computers needed. During the summer months when water flow increases, so does production.

It also benefits from a climate that is favorable to mining. The capital, Thimphu, is extremely cold in winter, as are other areas. This is ideal for keeping the temperature of large computers down, which can easily overheat when working at full capacity. Furthermore, this also reduces the energy costs associated with Bitcoin production.

The cryptocurrency has had a rocking ride over the past 12 months. The introduction of Bitcoin ETFs started this, inviting more traditional investors to dip their toes into cryptocurrency. This was followed by a halving event, which typically sees price rises follow soon after. All this was exasperated by a new administration in the United States, which was crypto-friendly and resulted in a new high for the currency. Today, the Bitcoin price outlook shows a steady long-term increase, with a current plateau just under the $86,000 mark.

Bitcoin Miners Elsewhere 

In countries that are not blessed with a cheap abundance of hydroelectric power, Bitcoin mining over the past year has become increasingly tough. Energy prices are one of the main reasons. In an intensive sector, many miners have had to relocate to areas where energy costs are cheap or face shutting up shop altogether. Many have repurposed their equipment for the use of AI. Competing with these industries has driven prices up even further.

This was also exasperated by last year’s Bitcoin halving event. This occurs every four years and is a hedge against inflation. It lowers the reward given to Bitcoin miners. As a result, those creating Bitcoin were receiving less for their work.

Finally, Bitcoin mining equipment needs to be upgraded. This is to make sure it is efficient, with better models being released each year. Miners have to make calculated choices regarding investment and these devices are not cheap. To upgrade a whole operation’s worth takes substantial investment.

The Current Climate in Bhutan 

Bhutan only has around 800,000 citizens. It is a landlocked country between India and China. The size of Switzerland, the land is mountainous with no place for farming. It has a relatively low GDP at $3.02bn and a mediocre revenue from tourism. This is because it protects its natural parks and areas by limiting the amount of visitors who can enter. It is also the first country to become carbon neutral, showing its commitment to the environment.

Its labor market is currently at a crossroads. It has an educated workforce in rural areas, which includes a large proportion of women. However, there is very little means for upward social mobility. Around 63% of the workforce labor for more than 48 hours a week according to the World Bank. Over 11% of workers have no written contract. Women are also at an extremely high risk of being unemployed, not in training or education. This is often dependent on their family status.

This has led to a mass migration of its educated youth. Around 5,000 per month were leaving at the last count, a vast sum in comparison to its population.

Can Bitcoin Save Bhutan? 

Bitcoin is being used to entice the population of Bhutan to stay and not seek work elsewhere. This is usually in countries like Australia, where wages are much higher. Last year the government sold $100m USD of Bitcoin. According to news outlet Al Jazeera, it was then put towards doubling the salaries of civil servants in the country.

The results of how this helped have been mixed. Around 500 workers in the sector left their jobs in the first quarter of the year. This was in comparison to 1,900 who had left in the same period the year before. This suggests that simply increasing wages may not be the only problem facing the country.

It is unknown how much Bitcoin the country currently holds. They are estimated to be around $600m with smaller holdings in other cryptocurrencies. Obviously, the value of this is subject to huge levels of volatility, as is the nature of cryptocurrency. The country has also been wary of foreign investment, as it believes this may challenge its delicate balance with its natural surroundings.

If cryptocurrency can help Bhutan’s ailing economy remains to be seen. It is likely that more social mobility is needed, and higher wages for civil servants alone will not be able to provide this. Thus, the country must use Bitcoin as part of a wider strategy to safeguard its wealth and happiness, for future generations.