Ethiopia is increasingly attracting Chinese Bitcoin miners due to its low electricity costs and close ties to Beijing, providing a haven for an industry seeking stability after disruption in China.
Ethiopia, energy El Dorado for Chinese bitcoin miners
Since the ban on Bitcoin mining in China in 2021, Chinese miners have migrated to different countries offering cheap energy, such as Kazakhstan, Russia, Iran, and Texas.
Ethiopia, long absent from the global Bitcoin mining scene, has become the new destination of choice for Chinese miners, fleeing regulatory restrictions and high energy costs in their home country.
The country allowed Bitcoin mining in 2022, although still banning crypto trading. Several Chinese companies are participating in the construction of the new Ethiopian hydroelectric dam, valued at $4.8 billion, which will power mining operations.
According to mining services provider Luxor Technology, Ethiopia is already among the world’s top recipients of mining equipment. According to Ethan Vera, director of operations, Luxor’s first major contracts for shipping equipment to this country were concluded in September.
The state electricity monopoly claims to have signed supply agreements with 21 mining companies, mostly Chinese.
An energy boon for a controversial industry
The country’s major asset lies in its electricity, which is among the least expensive in the world, from hydroelectric dams. Once the GERD project is completed, production capacity will double, according to Ethiopian Electric Power, the national company.
During an interview with BloombergHiwot Eshetu, director of marketing and business development, said the company charges bitcoin miners a fixed rate of 3.14 US cents per kilowatt hour for electricity drawn from substations.
Besides the cost, the Ethiopian climate lends itself perfectly to the optimal operation of the equipment. The temperature oscillates between 5°C and 25°C on average, the ideal according to Bitmain.
Some miners like BWP, which hosts machines from miners from China and other countries, have already started shipping hardware to Ethiopia in early 2021. In December, the company announced the opening of a 120-megawatt data center in Addis Ababa, a considerable size even by Texas standards.
Favorable geopolitical context
Ethiopia is banking on bitcoin mining, despite banning crypto trading, to generate much-needed foreign currency. She negotiates a bailout with the IMF after a payment default.
At the same time, the country has strengthened its ties with China, its largest creditor and investor. The Chinese and Ethiopian presidents have elevated their relations to the status of an “all-weather strategic partnership.” China is financing many megaprojects in the country.
Encouraged by these developments, Chinese miners view Ethiopia as a Chinese province. They develop their activities there without feeling obliged to request official authorization. The Ethiopian government is gradually regulating this emerging bitcoin mining sector.
Despite the political risks, Ethiopia is emerging as a new host country for Bitcoin miners expelled from China. With an abundance of cheap electricity and close ties to Beijing, the country provides an ideal base for resuming their operations. This windfall in foreign currency could be crucial support for its fragile economy.
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