In the vicinity of electricity substations linked to the monumental Grand Ethiopian Renaissance Dam (GERD), a striking sight emerged last spring: cargo containers housing powerful, energy-intensive computers. These containers marked the arrival of Chinese bitcoin miners in the Horn of Africa, seeking refuge from fluctuating political and economic climates and enticed by Ethiopia’s exceptionally low electricity costs and welcoming governmental policies.
Ethiopia, despite maintaining a ban on cryptocurrency trading, opened its doors to bitcoin mining in 2022. Strengthening ties with China over the past decade, Ethiopia enlisted the support of several Chinese firms in constructing the $4.8 billion GERD, which now serves as the power source for these miners.
Amid a global backlash against the energy-intensive bitcoin industry, Ethiopia stands out as a rare opportunity for mining firms. While climate concerns and power shortages have led to scrutiny elsewhere, Ethiopia’s abundant and affordable electricity attracts attention. Chinese companies, once dominant in bitcoin mining but overshadowed by local competitors in regions like Texas, find Ethiopia appealing for its advantageous conditions.
However, this venture presents risks for both parties involved. Historically, countries like Kazakhstan and Iran initially welcomed bitcoin mining only to reverse course due to energy consumption concerns and potential social unrest. China’s abrupt ban on bitcoin mining in 2021 abruptly ended its reign as the industry hub, forcing numerous companies to relocate.
Ethiopian officials tread cautiously due to the controversies surrounding bitcoin mining. Despite recent increases in power generation capacity, a significant portion of the population lacks access to electricity, making mining a sensitive issue. Yet, it holds promise as a source of foreign exchange earnings.
Ethiopia has swiftly become a magnet for bitcoin mining equipment, with Luxor Technology estimating its rise to one of the top destinations for mining machines. State power entities have inked deals with 21 bitcoin miners, overwhelmingly of Chinese origin, signaling Ethiopia’s emergence as a hotspot for mining operations.
The influx of mining equipment worth millions underscores the complex political and economic dynamics at play. Bitcoin miners play a pivotal role in maintaining the cryptocurrency network, albeit amidst market volatility. Access to inexpensive electricity is critical, driving miners to seek locations with low power costs.
Ethiopia’s decision to permit bitcoin mining aligns with its economic goals, as foreign currency earnings from mining operations alleviate financial strains. Despite regulatory uncertainties, the Ethiopian government’s receptiveness to the sector signals a unique opportunity for miners, particularly those from China.
The allure of Ethiopia extends beyond its energy advantages. Favorable climate conditions and the country’s growing strategic partnership with China make it an attractive investment destination. Geopolitical considerations, coupled with China’s significant investments in Ethiopia, further bolster confidence among Chinese mining firms.
As China strengthens its presence in Africa, Chinese bitcoin miners eye additional opportunities across the continent, including Angola and Nigeria. With Ethiopia poised to become a major player in bitcoin mining, fueled by its ambitious hydropower projects and supportive government policies, the Horn of Africa emerges as a new frontier in the global bitcoin industry.
Read more: Chinese bitcoin miners are flocking to Ethiopia, attracted by cheap energy, ideal climate
