Tether Terminates Crypto Mining Initiative in Uruguay
In a significant move for the cryptocurrency sector, Tether, the prominent stablecoin provider, has officially terminated its ambitious $500 million crypto mining initiative in Uruguay. The decision is attributed primarily to soaring energy expenses coupled with the absence of a conducive tariff framework, as reported by local media outlet El Observador. In the aftermath of this development, the firm has laid off 30 of its 38 employees in the region.
Background and Initial Plans
Tether Holdings communicated the decision to local authorities from the Ministry of Labor and Social Security (MTSS) following a meeting earlier this week at the National Directorate of Labor (Dinatra). The company initially embarked on a journey into cryptocurrency mining in May 2023, in partnership with a local licensed entity, touting Uruguay’s dependable electrical infrastructure as a key asset.
The initial projections indicated a hefty investment of $500 million intended to establish three Data Processing Centers across the Florida and Tacuarembó departments, alongside ambitious plans for a wind and solar energy facility with a projected output capacity of 300 megawatts. However, Tether had only allocated around $100 million towards this venture, setting aside an additional $50 million for infrastructure development, which was to be managed by the local utility, UTE, as part of the national interconnected energy system.
Challenges Faced
This unexpected withdrawal comes on the heels of claims from UTE that electricity supplies were suspended back in late July due to Tether’s delinquent payments, which had amassed to nearly $5 million. Users on social media have expressed skepticism regarding Tether’s ability to finance its projects, especially after it failed to settle its debts. Attempts by Tether’s local subsidiary, Microfin, to negotiate long-term electricity agreements seemed to falter, prompting the eventual shutdown of operations.
Future Prospects
Tether has expressed concern over the country’s potential, suggesting that for projects of such magnitude, a fair and stable tariff structure is crucial. In a correspondence to UTE, the company lamented the inability to finalize an agreement and indicated a need to reassess their operational strategy. Despite this setback in Uruguay, Tether has broader goals in the crypto mining sector, aiming to control approximately 1% of the global Bitcoin network. They have previously announced intentions to expand mining activities in Paraguay and El Salvador, where electricity costs remain more favorable, with planned capacities ranging from 40 to 70 megawatts per location.
Conclusion
Tether’s experience in Uruguay has raised pertinent questions about the feasibility of energy-intensive mining operations in regions with high electricity costs, underscoring the challenges miners face in sustaining their ventures under current conditions.
