China’s crypto ban a big boon for little Laos
BANGKOK – After China’s recent cryptocurrency crackdown, impoverished Laos is now allowing Bitcoin mining, fueled by abundant hydroelectric power from the Mekong River and shrugging off US warnings of disastrous environmental problems.
The surprise announcement on September 9 by the Lao Prime Minister’s Office, allowing the creation of Bitcoin, Ethereum and other blockchain-based currencies, makes Laos the only Southeast Asian country to officially permit and participate in crypto mining.
China had allowed Bitcoin miners to feed on its cheap electricity for several years – mostly in the provinces of Inner Mongolia, Xinjiang, Sichuan and Yunnan – but shut down their systems in May by tightening regulations.
Worried foreign investors struggled to export expensive, delicate, massive computers out of China while scouring the world for fresh places to set up their power-intensive mining operations.
Last week, China’s central bank added a ban on all cryptocurrency transactions, in an effort to control the flow of money in and out of the country.
“China has shot itself in the foot by going after its Bitcoin miners,” Forbes reported. “The US is becoming a big-time miner in its wake.”
Mining is now allowed in Texas, South Dakota, Nebraska, North Carolina, Ohio, Pennsylvania and other US states.
International miners also moved from China to Canada, Kazakhstan, Uzbekistan, Russia and elsewhere.
Mining or “minting” fresh crypto involves constructing and operating huge, linked computer “rigs” to determine a 64-digit hexadecimal “hash” number based on increasingly complex algorithms – essentially guessing trillions of possible random answers.
By doing so, miners confirm Bitcoin and transactions are genuine and add them to the blockchain.
Those decentralized miners then collect a commission in Bitcoin after validating one megabyte of Bitcoin transaction data.
In competition to host miners, several countries in the northern hemisphere boast of year-round icy temperatures to cool giant, heat-generating databases.
Invitations from Iceland also flaunt its abundance of hydroelectricity and geothermal energy.
Unfortunately for Laos, the weather is usually hot, and its jungle-clad mountains do not receive snow. Its cheap hydroelectricity, however, is a dazzling lure.
As a result of 73 hydroelectric plants, electricity is Laos’ main export – 30% of the country’s total — valued at $6 billion last year.
Laos also offers inexpensive real estate, low-paid workers, loose regulatory enforcement, and special economic zones with financial sweeteners for investors.
But the country’s poorly educated workforce, opaque bureaucracy, limited transportation routes, alleged corruption and inefficient legal system could dampen some foreigners’ enthusiasm for crypto mining.
For the government to profit, foreign computer experts would need to arrive in Laos to build, operate, repair, clean, and test crypto databases inside large warehouses linked to hydroelectric stations.
Top Lao government officials are ready to help, including the ministers of finance, energy and mines, planning and investment, technology and communications and public security.
Local investors for mining and trading include Wap Data Technology Laos, Phongsubthavy Road & Bridge Construction Co, Sisaket Construction Co Ltd, Boupha Road-Bridge Design Survey Co, Ltd, the Joint Development Bank, and the Phousy Group, according to the government-approved Laotian Times.
The government’s Bank of Laos will decide regulations on cryptocurrency use inside the tiny, debt-saddled country which is dependent on US aid, Chinese loans, Thai investment, and other foreign sources.
It is illegal for Lao citizens to buy or sell cryptocurrencies.
Ignoring the law, some Lao businesses accept cryptocurrencies as payments, and advertise opportunities to invest in digital currencies, the Laotian Times said.
Laos is desperate to modernize from the 1965-75 devastation left by the US Air force, which created one of the world’s most heavily bombed countries.
The Pentagon tried but failed to stop the communist North Vietnam Army from using Lao territory as a so-called Ho Chi Minh Trail, which allowed them to infiltrate US-backed South Vietnam.
Despite presenting itself as a hammer-and-sickle communist regime, Laos welcomes international capitalists seeking to exploit its natural resources.
The government has promoted dam building to position the landlocked nation as the “battery of Asia” through power exports to energy-thirsty neighbors like Thailand.
While Laos expects crypto mining will harness the Mekong River and its tributaries for fast cash, US rhetoric is targeting the dams.
The Mekong begins in Tibet’s glaciers, crosses China, and meanders from Laos’ northern border south into Cambodia.
The river then broadens into southern Vietnam’s Mekong Delta and dumps into the South China Sea near Ho Chi Minh City.
The US supports efforts by Cambodia and Vietnam to halt dam construction, and enforce regulations on the seasonal timing and quantity of water retained and released by the dams, so the two downriver nations’ fishery and agricultural sectors do not wither.
The US and other critics portray the dams as the worst environmental crisis Southeast Asia currently faces, amid concern that Beijing joined other investors rushing construction to extract quick profits.
Most Laotian hydroelectric power is sold to the government-owned Electricity Generating Authority of Thailand which lights up Bangkok, Chiang Mai and other cities.
Laos needs just a few jolts of electricity because its scattered population is only seven million. Chinese companies built many of the dams while others have been constructed and financed by Thais and others.
A total of 140 dams are expected to eventually punctuate Laos and, if plans proceed, fuel a boom in crypto mining across the small and poor nation.
Richard S. Ehrlich is a Bangkok-based American foreign correspondent reporting from Asia since 1978.
Excerpts from his two new nonfiction books, “Rituals. Killers. Wars. & Sex. — Tibet, India, Nepal, Laos, Vietnam, Afghanistan, Sri Lanka & New York” and “Apocalyptic Tribes, Smugglers & Freaks” are available here.