With an economy struggling under national debt, Laos has turned to cryptocurrency to solve its woes. It will use its excess hydroelectric power to mine crypto and convert it into fiat currencies.
Laos has long attempted to become the “battery” nation of Southeast Asia. A decades-long spree of dam building has provided the country with two outcomes. On the one hand, its level of debt is spiralling out of control. Yet it also has an abundance of excess energy, which it plans to use by mining cryptocurrencies. Not only will this be used to ease debt, but it will also diversify the country’s assets.
The Booming Value of Cryptocurrencies
Laos could not have picked a better time to announce its decision. The crypto prices today are in the midst of a huge leap. As of October 7th, Bitcoin is at $124,889, brief correction after breaching the $125,000 mark on Monday, October 6th. ETH has risen to the $4721 level after testing its record highs. There have also been gains for other altcoins like SOL. This has been driven by global economic uncertainty, proving that crucially, Bitcoin and cryptocurrencies are becoming a safe haven asset in times of turmoil.
This makes crypto all the more attractive for the economy of Laos, which is not a strong one. It has one of the highest debt-to-GDP ratios in Southeast Asia, surpassed only by Singapore. This has mainly been amassed through foreign currency loans, the bulk of which have come from China.
As a result of its dam-building programme, the country now produces much more electricity than it uses via hydroelectricity. Very often, this is more than domestic demand and foreign exports can absorb, which is exacerbated when the rainy season arrives. This means the Électricité du Laos (EDL), the national energy provider, has a large surplus.
Voices Against Laos Crypto Mining Sector
Reports of this concept first emerged in the state-run Vientiane Times. They reported that in a government meeting, policymakers discussed the possibility of “long-term economic opportunities.” One of these was through digital asset mining.
The country’s aspirations first came to light in 2023, when the country set up a digital economy strategy. This focused on the development of AI, IoT, digital finance, and blockchain tech. It is believed the country is hoping to be a fully digital economy by 2030, licensing local mining and trading facilities to Chinese nationals. China banned cryptocurrency and mining in 2021, and Laos hopes to capitalise on this.
There are voices against this, and there have been many against the dam project over the last few years. The project has forced many people to move due to the relocation of rivers. This has, in turn, reduced harvests and damaged the domestic fishing industry. Hydropower is also seasonal, so while it is plentiful in rainy seasons, during dry spells, the country often has to buy power from neighbors like Thailand.
The results are that the Pianporn Dites of International Rivers have reported that compensation to those forced to move has not been forthcoming. This is because many believe the move has been driven by the pressure of debt as opposed to domestic needs. However, Electricite du Laos has not let crypto miners do what they wish. In August, it announced it would be cutting off power to many farms. This was due to a mix of unpaid debts, drought, and exports.
The government has held the stance that using renewable energy minimizes the impact on the local environment. It has also introduced a formal licensing system designed with foreign investment in mind. Domestic financial bodies are also working on ways to legally and safely turn cryptocurrency into fiat currencies. This will help the government monitor energy use and collect the appropriate taxes.
Laos Entering a Crowded Sector
The country will now enter a crowded sector, with multiple countries attempting to mine the last remaining Bitcoin assets. At the top of the pile is the US, with a monthly hash rate share of 37.84%. Despite having outlawed mining, China is second at 21.11% with Kazakhstan coming in third. Canada and Russia are fourth and fifth, respectively.
The advantage Laos has is cheap, renewable energy. However, it is not the first country or state to utilise its natural resources to mine crypto. Bhutan is another struggling economy that has used hydropower with a similar intent. The country then used the sale of this to double the salaries of its civil servants, preventing a brain drain that was causing many of its citizens to move abroad.
If it is to also move into other digital industries, such as AI, then it has even further to go. Major companies such as Nvidia are already forming partnerships with companies like OpenAI to do this. Binance noted that NVIDIA’s $100B plan to invest in OpenAI recently created a self-reinforcing capital loop, drawing comparisons to past crypto treasury strategies. They believe this AI boom is attracting major institutional capital, positioning itself as a strong competitor for liquidity that might otherwise flow into digital assets.
The trick may not be for Laos to start its own companies, but to attempt to attract these global companies that already exist. Its new licensing system, combined with cheap power, may be able to do this, but it will have to compete with other countries following a similar path.
