Laos launches Bitcoin mining and trading pilot to boost economy

In Laos, the government gave permission to six companies to start mining and trading bitcoin. It seems to be a change in policy, because last month the central bank emphasized that both are banned in Laos. It is a pilot, but according to analysts, Laos would like to generate new income by mining for bitcoins with the power surpluses from local hydroelectric power plants.

The Laotian government gave some local companies permission to engage in bitcoin mining and trading, The Laotian Times recently reported. This is a pilot with six companies: Wap Data Technology Laos, Phongsubthavy Road & Bridge Construction Co., Sisaket Construction Company Limited, Boupha Road-Bridge Design Survey Co., Ltd., Joint Development Bank, and Phousy Group. They are mainly construction companies and project developers.

Various government agencies are involved in drawing up the regulations and legal frameworks. The Ministry of Technology and Communications is taking the lead and is cooperating with the Ministry of Finance, the Ministry of Planning and Investment, the Ministry of Energy and Mining and the Ministry of Public Security. The Lao central bank and the national energy company are also involved.

It seems to be a change in the policy of the Laotian government. The central bank of Laos has been warning about bitcoin since 2018 and last month it even issued a general ban on buying or selling it. Now, a month later, sentiment seems to be turning.

Power surpluses from hydroelectric power plants

Analysts say that may have something to do with the economic state of affairs in the country, The Financial Times reported. Laos is one of the poorest countries in the region and its economy largely depends on tourism, but due to the COVID crisis, most tourists stayed away. Meanwhile, Laos’ considerable mountain of debt continues to mount.

However, Laos has relatively many hydroelectric power plants, which are located in the Mekong River. Under normal circumstances, they already export two-thirds of all generated electricity abroad because there is too little demand locally and now that the electricity consumption of the tourism sector has ceased, the power surpluses have increased further.

The Lao government would therefore like to use the power for bitcoin mining. After all, the production costs of a bitcoin largely consist of energy costs and there is no shortage of cheap energy in Laos. Through bitcoin mining, Laos can convert the current surpluses directly into digital money. The theory seems to be in line with the fact that mainly project developers received permission.

“Any way you look at it, Laos has an abundance of power production capacity and there isn’t much internal demand for that power ,” Lyriant Advisory consultant David Tuck said in an interview with the Financial Times.

If the pilot is successful, there will be opportunities for Laos. Laos could be an attractive country for foreign miners to settle. For example, many Chinese miners are currently looking for new housing due to the Chinese ban on bitcoin and mining, and because of the climate problem, miners are increasingly looking for power that is not only cheap, but preferably also sustainable. Neighboring Laos is also a lot closer to Chinese miners than other alternatives.

Country FOMO

Laos joins a series of countries that recently introduced more favorable regulations for the bitcoin sector. El Salvador led the way and recently recognized bitcoin as legal tender, making it one of the country’s two official currencies. In addition, it also announced plans for bitcoin mining with sustainable power generated from volcanoes.

In response, politicians from Panama, Paraguay, Mexico and Colombia, among others, called for local legislation to be amended as well. Such plans are also being made in the Polynesian island nation of Tonga. Ukraine recently took a concrete step by legalizing bitcoin, among other things to mine for bitcoins with the power surpluses from nuclear power plants, and the government also regulated bitcoin payments in Cuba. Iran and Venezuela have been experimenting with bitcoin mining for some time.

In America, some states such as Wyoming, Colorado, Ohio, and South Dakota lead the way in providing legal frameworks and a favorable business climate, but lately Texas seems to be catching up. That recently introduced new regulations that give bitcoin a legal status.

The energy sector is increasingly discovering that bitcoin mining offers solutions for power surpluses and that it can help against climate-unfriendly flaring.

s: Asian Development Bank, license CC BY-NC 2.0

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