Chinese Bitcoin miners find a new refuge in Ethiopia

Ethiopia is increasingly attracting Chinese Bitcoin miners due to its low electricity costs and its close ties with Beijing, thus providing a haven for an industry in search of stability following disruptions in China.

Ethiopia, the Energy Eldorado 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 preferred destination for Chinese miners fleeing regulatory restrictions and high energy costs in their home country.

The country authorized Bitcoin mining in 2022, although still banning crypto exchanges. Several Chinese companies are thus participating in the construction of Ethiopia’s new hydroelectric dam, valued at 4.8 billion dollars, which will power the mining operations.

According to mining services provider Luxor Technology, Ethiopia is already among the main global recipients of mining equipment. As per Ethan Vera, Chief Operating Officer, Luxor’s first major contracts for shipping hardware to this country were concluded in September.

The state electricity monopoly claims to have made agreements to supply 21 mining companies, mostly Chinese.

An Energy Windfall for a Controversial Industry

The country’s main asset lies in its electricity, among the least expensive in the world, generated from hydroelectric dams. Once the GERD project is completed, the production capacity will double, according to Ethiopian Electric Power, the national company.

In an interview with Bloomberg, Hiwot Eshetu, director of marketing and business development, indicated that the company charges Bitcoin miners a fixed rate of 3.14 US cents per kilowatt-hour for electricity derived from substations.

Besides the cost, Ethiopia’s climate is perfectly suited to the optimal functioning of the equipment. The temperature averages between 5°C and 25°C, ideal according to Bitmain.

Some miners like BWP, which hosts machines for Chinese miners and others from different 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 Texan standards.

Favorable Geopolitical Context

Ethiopia is betting on Bitcoin mining, despite banning crypto exchanges, to generate the foreign currency it urgently needs. It is negotiating a bailout with the IMF following a default.

At the same time, the country has strengthened its ties with China, its top creditor and investor. The Chinese and Ethiopian presidents have elevated their relations to the rank of an “all-weather strategic partnership.” China finances many megaprojects in the country.

Encouraged by these developments, Chinese miners see Ethiopia as a Chinese province. They are developing their activities without feeling the need to ask for official authorization. The Ethiopian government is progressively regulating this emerging Bitcoin mining sector.

Despite political risks, Ethiopia is emerging as a new haven for Bitcoin miners expelled from China. With an abundance of low-cost electricity and close ties with Beijing, the country offers an ideal base for the resumption of their operations. This influx of foreign currency could be crucial support for its fragile economy.