Ethiopia may be embracing Bitcoin mining with new data mining partnership
Ethiopian Investment Holdings, the largest sovereign wealth fund in Africa, has announced the signing of a memorandum of understanding (MoU), which is suspected to involve a deal on Bitcoin mining.
Deal uncertainty
Taking to LinkedIn on Feb. 15, the sovereign wealth fund outlined details of a partnership with Data Center Service, a subsidiary of Hong Kong’s West Data Group. Separately, Kal Kassa, CEO of Ethiopian operations at Hashlabs Mining, posted on the X social media platform, outlining that it was a stakeholder in the project and that it involved Bitcoin mining. The matter lacks full confirmation however, given that Kassa subsequently deleted his post while the sovereign fund’s statement falls short of mentioning Bitcoin mining.
Once verified, the project would signify a substantial investment of $250 million. It’s understood that the investment would be directed towards the establishment of state-of-the-art infrastructure tailored for data mining and artificial intelligence (AI) training operations within Ethiopia.
Exploiting abundant energy resources
A key component of this venture may involve the setup of Bitcoin mining operations utilizing Canaan Avalon miners. This initiative would align with Ethiopia's broader strategy to capitalize on its abundant energy resources to attract international investment and stimulate economic growth.
Ethiopia has about 5,200 MW of installed generation capacity, 90% of it coming from hydropower and the remainder from wind and thermal sources.
While the official confirmation from the government is pending, the ambitious project has sparked both excitement and skepticism within the industry. Concerns linger regarding the energy-intensive nature of Bitcoin mining and its potential strain on the local electricity supply, an issue of particular relevance in a nation where energy accessibility remains a pressing challenge for many.
Bloomberg report
Earlier this month, a report from Bloomberg highlighted Ethiopia as being a new haven for Chinese crypto miners. Following the imposition of a mining ban in China in 2021, many operations were redeployed overseas. Kazakhstan in particular was a popular choice. The Eurasian country wasn’t prepared for the influx, leading to power blackouts.
Hashlabs Mining co-founders Jaran Mellerud and Alen Makhmetov both featured in the article. Mellerud outlined the difficulty, stating:
“Firstly, countries can run out of available electricity, leaving no room for miners to expand. Secondly, miners can suddenly be deemed unwelcome by the government and be forced to pack up and leave.”
Makhmetov outlined that he had a 10 MW facility in Kazakhstan which still sits idle today as curbs and taxes enforced in Kazakhstan on miners “basically killed the industry.”
Despite these difficulties in Kazakhstan and China's official ban on cryptocurrency trading, the legalization of Bitcoin mining in Ethiopia in 2022 has spurred a notable influx of Chinese miners seeking new investment avenues.
Ethiopia will need to be mindful of the difficulties experienced in Kazakhstan. With that, the Ethiopian government's move towards regulating cryptographic products, including mining activities, reflects a measured yet optimistic approach towards harnessing the economic potential of Bitcoin mining.
This regulatory framework aims to strike a balance between fostering sector growth and safeguarding the country's energy security and environmental commitments.
