Laos Considers Cryptocurrency Mining
Laos is contemplating the conversion of its surplus hydropower into a resource for cryptocurrency mining, a move that has ignited both international interest and local dissent. The nation’s extensive dam-building initiative has resulted in an electrical surplus but has simultaneously burdened it with significant debt, amounting to billions of dollars. In a bid to capitalize on this excess energy, Lao officials are assessing the potential benefits of the energy-intensive crypto sector.
Economic Prospects and Criticism
A report from the government-run Vientiane Times highlighted discussions among policymakers regarding future economic prospects, particularly in the realm of digital currency mining, which aims to transform surplus energy into financial benefits for the nation. However, this strategy has met with considerable criticism, with opponents highlighting the severe social and ecological repercussions, including:
- Disruption of river ecosystems
- Diminished agricultural yields in downstream communities
- Forced relocation of thousands of residents
Vitoon Permpongsakaroen, a director with the Mekong Energy and Ecology Network, noted that the rationale behind this shift is more about alleviating debt rather than addressing any internal energy demands.
Moreover, Laos faces seasonal variability in hydropower generation; during dry seasons, the country often resorts to importing electricity from its neighbors, particularly Thailand.
Community Impact and Investor Interest
Experts like Pianporn Dites from International Rivers have pointed out that commitments to support communities affected by dam projects have largely fallen short, exacerbating the plight of those displaced. Despite the backlash, attention from regional investors has proliferated as Laos aims for a fully digital economy by 2030, planning to issue licenses for local crypto operations while attempting to manage the influx of Chinese miners seeking refuge following China’s crackdown on crypto activities in 2021.
Digital Economy Strategy and Financial Challenges
In May 2023, the Lao government introduced a comprehensive digital economy strategy that emphasizes technologies like blockchain, AI, IoT, and electronic finance. However, in August, Electricite du Laos, the state-owned utility company, disclosed plans to reduce electricity supply to cryptocurrency farms due to factors such as drought, commitments to power exports, and outstanding debts.
The financial landscape for Laos remains precarious. In November, the International Monetary Fund cautioned that high levels of public debt threaten the country’s economic prospects in the medium term. Additionally, rising inflation and a depreciating Kip, which has lost 50% of its value against the US dollar in five years, further complicate the situation. Trade relations are also strained due to steep US tariffs on Laotian exports, currently at 40%, among the most substantial levied on any of Washington’s trading partners.
