Bhutan is thriving while Pakistan is missing out on the cryptocurrency revolution

ISLAMABAD: Although Pakistan and Bhutan are 2,000 kilometers apart, both have ventured into cryptocurrency mining at the same time, hoping to boost their economies.

While Pakistan has failed to go beyond making headlines, Bhutan has quietly made significant progress. Today, Bhutan has emerged as the fifth largest holder of Bitcoin, after the United States, China, the United Kingdom and Ukraine. The country’s bitcoin reserves now make up 35 percent of GDP.

In 2020, the government of Khyber Pakhtunkhwa (KP) was excited about the potential of Bitcoin mining to generate revenue. The project was designed by Waqar Zaka and Ghulam Ahmad Rumi, two crypto experts, and supported by Ziaullah Bangash, Advisor to the Prime Minister on Science and Technology. Rumi, a miner who has two mining farms in Shangla, offered to use them as pilot projects.

KP was an ideal location for such a project. The province’s abundant water reservoirs can generate enough electricity to power mining operations. A government study estimated that the Khyber Pakhwa region has the potential to produce 30,000 megawatts of electricity through hydropower.

Cryptocurrency mining involves using powerful computers to solve complex mathematical problems, a process that requires a large amount of electricity and accounts for a significant portion of operational costs. Miners are rewarded with coins for validating transactions, providing a lucrative source of income. This could have been a lifeline for Khyber Pakhtunkhwa province, which has struggled to pay government employees and has seen its tourism industry decline due to terrorism.

In December 2020, the Khyber Pakhtunkhwa Provincial Assembly passed a resolution urging the federal government, led by Imran Khan, to legislate on cryptocurrencies. A committee headed by Bangash and including regional financial officials and cryptocurrency experts was formed in February 2021 to formulate recommendations. A draft law to regulate cryptocurrency mining has been prepared and is ready for Cabinet approval.

However, a sudden turn of events derailed the project. On the eve of submitting the bill to the provincial cabinet, Bangash received calls from the Prime Minister’s Office ordering him not to go ahead, without providing any reason. Frustrated by the lack of support, Bangash resigned in protest. He confirmed in an interview with Al-Akhbar that his resignation came due to the obstacles created by the federal government.

Meanwhile, the Federal Investigation Agency (FIA) raided one of Rumi’s mining farms, seizing equipment despite its lack of jurisdiction over such operations. Bangash revealed that more than 300 overseas Pakistanis have expressed interest in investing in cryptocurrency mining if proper regulations are put in place. Even international media, including Reuters, highlighted Khyber Pakhtunkhwa’s progressive vision. However, the federal government’s monitoring committee turned out to be ineffective, leaving Pakistan’s cryptocurrency ambitions unfulfilled.

While Pakistan faltered, Bhutan quietly moved forward, just as it had dealt with the Pakistani nuclear program decades earlier. Druk Holding & Investments (DHI), Bhutan’s sovereign investment arm, has led the cryptocurrency mining initiative. Although some sources indicate that operations began in 2019, evidence suggests that they increased in 2020.

Bhutan has leveraged its abundant hydropower resources, with a potential of 23,760 megawatts, to sustainably run large-scale Bitcoin mining operations. The decline in tourism, exacerbated by Covid-19, has prompted the country to diversify its revenue sources.

By 2021, Bhutan had expanded its reach, investing millions in digital assets. Today, the country’s Bitcoin holdings are worth $1.2 billion, even after spending portions of it to pay government salaries. Bhutan aims to increase its mining capacity to 600 MW in partnership with Singapore-based Bitdeer.

Beyond cryptocurrencies, Bhutan’s DHI, which contributes about 25% of its GDP, has ventured into other emerging technologies, including artificial intelligence, metaverse, and blockchain. One of its most notable initiatives is the creation of the world’s first decentralized national identity platform, a concept that Pakistan is now exploring through recent legislation.