Ethiopia is set to the park of Bitcoin mining in Africa as the Government’s investment arm, Ethiopian Investment Holdings (EIH), signs a memorandum of understanding with Hong Kong-based West Data Group’s Center Service PLC to commence mining Bitcoin.
According to EIH, the groundbreaking partnership is placed under an agreement of a whooping $250 million data mining project which is supposed to birth the first Bitcoin mining in Africa.
The investment organization stated, “that is dedicated to establishing cutting-edge infrastructure for data mining and artificial intelligence training operations in Ethiopia.”
Ethiopia aims to position itself as a leader in Africa’s data centre space, which is estimated to grow to $5.4 billion by 2027, according to Aritzon Advisory and Intelligence.
Kal Kassa, CEO for Ethiopia at Hashlabs Mining,
“The development is part of the Ethiopian Government’s aim to drive economic growth by leveraging technology and energy sources to attract foreign investments.”
This partnership was formed after the Ethiopian government received a grant of $830,000 from The African Development Bank for a technical assistance grant agreement for Ethiopia in 2022.
The allocated funds will be instrumental in integrating climate risk management, gender perspectives, and resilience-building initiatives into economic planning and development activities within the Ziway-Shallah sub-Basin of the country.
Before signing the Bitcoin mining deal, the Climate Investment Funds invested $33 million of concessional loans and grants in Ethiopia and leveraged more than twice that amount from public, private, and other sources.
In 2019, another set of funding which includes a US$90 million loan from the International Fund for Agricultural Development (IFAD),$350 million in co-financing from the International Development Association (80% loan and 20% grant), and $11 million from the beneficiaries themselves were received on behalf of Ethiopian farmers.
The project named, Lowlands Livelihood Resilience was aimed to increase resilience to climate shocks in the communities in the lowland areas of Ethiopia which are dependant on rain-fed agriculture and pastoralism and thus highly vulnerable to droughts, desertification, and floods.
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FinTech Telex recalled that Bloomberg released a report on the adverse effect of Bitcoin mining on the climate. Forbes reports that
“Ethiopia’s energy potential could rival Texas’s generation capacity, which currently accounts for an astounding 28.5% of the US’s 40% global hash rate.”
With the kind of energy emitted during Bitcoin mining, Ethiopia’s energy potential is proposed to hit the roof. The question is how will Ethiopia be able to maintain the deal of climate deal.
Why this matters
Ethiopia, a nation at the forefront of climate change initiatives, has secured significant grants to combat environmental degradation. Yet, a recent move towards large-scale Bitcoin mining raises concerns about the country’s commitment to sustainability.
Bitcoin mining requires enormous amounts of energy, often relying on fossil fuels. This raises a red flag, considering Ethiopia’s hydropower dependence. While impressive, hydropower projects can disrupt ecosystems and displace communities. Critics, like renowned investor Warren Buffet, have called Bitcoin “rat poison squared” due to its environmental impact.
The surge in mining could strain Ethiopia’s already stretched energy grid. If demand outpaces supply, the nation might resort to using backup sources like coal, further negating the gains from green grants. This “crypto craze” could come at the expense of long-term environmental goals.
Ethiopia has the potential to be a leader in both climate action and technological advancement. However, reconciling these goals requires a nuanced approach. Perhaps exploring renewable energy sources specifically dedicated to mining could be a solution. But for now, the path chosen seems to be at odds with the country’s stated environmental objectives.
What Is The Impact Of Bitcoin Mining In Ethiopia?
In previous years, Ethiopia placed a ban on crypto trading in the country. In 2022, there were favorable mining laws that permitted high-performance computing and data mining where bitcoin mining falls.
Luxor Technologies, a Bitcoin mining services firm, reported that Ethiopia secured the fourth position in 2023, trailing behind the USA, Hong Kong, and Asia as a prime location for Bitcoin mining rigs.
Notably, Russian company Bitcluster has successfully constructed the initial 120 MW bitcoin mining facility in Ethiopia, while enterprises like Hashlabs Mining have embarked on establishing bitcoin mines within the country to cater to their international clientele.
However, bitcoin miners remain wary of potential regulatory changes in Ethiopia. Similar to other areas, bitcoin mining operations face uncertainty regarding long-term regulations.
It remains unclear if Ethiopia will follow the lead of Iran and Kazakhstan, which altered their stance on Bitcoin mining due to increased competition with local energy needs to allow the first Bitcoin mining in Africa.
Nevertheless, the Ethiopian government is actively seeking to boost foreign currency inflows to address economic hurdles. Viewing mining as a lucrative investment avenue, authorities are keen to capitalize on this opportunity to achieve their financial objectives.
