Ethiopia Lightly Treads Crypto Prospects as Foreign Investors Eye Bitcoin’s Next Darling

Ethiopia is quickly becoming a sought-after haven for Bitcoin miners lured by its affordable electricity rates, conducive climate, and hands-off regulatory framework. 

Last week, nearly 80 Bitcoin industry stakeholders—including 20 international miners from four continents—gathered in Addis Ababa for a two-day session, keenly eyeing the emerging prospects. Miners from Russia, Germany, the Netherlands, UAE, Venezuela, and China assembled for the “Unlocking Ethiopia’s Potential” summit held at the Hyatt Regency Hotel. 

Organized by local bitcoin education platform Bitcoinbirr and U.S.-based Potentia, the Summit drew these miners for discussions about the “unique opportunity.” 

Around 20 Bitcoin miners operate in the country, generating $27 million for Ethiopian Electric Power (EEP) within months of signing agreements to pay for power in foreign currency. By November of last year, this figure had doubled to $55 million.

Robert Luft, Potentia’s CEO, cited economic growth, energy grid stabilization, job creation, and diversified foreign direct investment as the potential benefits of the emerging industry.

“There are a lot of international individuals here (Summit), truly excited about capitalizing on Ethiopia,” he stated.

Robert pointed to Ethiopia’s share of the global hash rate, a measure of combined computational power of all miners on a cryptocurrency network, which was reportedly about 2.5% in December to illustrate the rapid growth. While Ethiopia leads the African continent in terms of hash rate, the CEO indicated the potential to grow the figure to above 10% in the coming few years.

“The time is now,” Robert said.

Several other prospective Bitcoin investors have seemingly taken note of the rapid growth as they look to get a solid footing in the country.

Aleksei Klimov, Business Development Manager at EMCD, a Russian company that started out with a sole focus on crypto mining but later expanded and incorporated more features, such as the EMCD Wallet and P2P trading, lauded local partnerships as a promising lynchpin for success. He pointed to the potential of partners with Ethiopian data centers to leverage the country’s energy potential and favorable regulatory environment.

“ I see a relatively low-cost opportunity to mine here, as there is no tax on miners like in Russia,”  he told Shega.

While Ethiopia certainly has one of the cheapest electricity tariffs in the world at around $0.032  per kWh for Bitcoin miners, the country has begun levying VAT on electricity over the past year. A massive hydropower generation capacity of around 5000 MW, poised to double with the completion of the Grand Ethiopian Renaissance Dam(GERD), combined with state subsidies, has kept energy prices relatively low.

Last week’s summit opened with remarks from Kal Kassa, founder of Bitcoinbirr and one of the better-known enthusiasts of Bitcoin in Ethiopia. He outlined the country’s unique advantages for miners while also highlighting the forex generation prospects of the sector.

“This is a serious industry,” he said. “There is serious potential here.”

The experience of miners already operating in the country was also one of the topics explored during the Summit. Timo Steipe, CTO of Munich International Mining, with a year of experience in the country, attested to the positive environment, highlighting the availability of local labor and the company's interest in investing in local workforce development. His company, Munich Mining, having operated in various global locations, including the US, Paraguay and Georgia, praised Ethiopia's access and safety.  

“We only have great experiences to date. I hope this continues for the next four to five years,” Timo said. 

Ethiopia’s regulatory hand over cryptocurrency in the past few years has been a blend of tacit approval and instances of restraint. 

In June 2022, the National Bank of Ethiopia issued a statement declaring cryptocurrency trading illegal. However, in August of the same year, Ethiopia's Information Network Security Agency (INSA) issued a registration ordinance for all cryptocurrency businesses. This directive, covering mining and transfers, replaced a previous outright ban and introduced the threat of prosecution for unregistered participants, signaling a slight relaxation of rules. A pause on new mining permits was also imposed by authorities in February of last year, while the Ethiopian Electric Power plans to earn over 120 million dollars across 2025.

Sunil Kumar of AmityAge, a Honduras-headquartered firm with operations in Ethiopia, drew parallels to Latin America’s mining ecosystems, noting Ethiopia’s potential to avoid pitfalls seen in volatile hubs like Kazakhstan. 

Nonetheless, Ethiopia’s hesitant regulatory meanders have yet to put a dent in the surge of prospective foreign crypto investors. Batyr Hydyrov, founder of UMINERS, a mining company established over a decade ago with operations in Ethiopia’s ICT park and headquartered in Abu Dhabi, was among them.

"We are trying to see what’s out here, how people work, and find potential networking opportunities," he told Shega.

Later in the Summit, a panel under the theme “Bitcoin Mining and Global Connectivity” featured the CEO of Ethiopia’s first Bitcoin mining company (QRB labs), Nemo Semret (PhD) Million Kibret, managing partner of BDO consulting alongside prospective European investors.

Million stated that Ethiopia’s regulators are still in the early stages of formulating strong accounting standards or prescribing tax regimes for the Bitcoin industry. He referred to the incorporeal nature of Bitocoin, which would entail predictable challenges in recording and taxing it.

“Hopefully, within a month, there will be a guideline on how Bitcoin should be treated in financial statements,” Million foreshadowed.

Reflecting on experiences as a miner in Ethiopia, Nemo recalled structuring QRB Labs to navigate the nascent legal landscape. He did not shy away from the challenges of Bitcoin in Ethiopia, noting how you still could not earn revenue through the cryptocurrency. 

“It is a high-risk place, but be prepared and be persistent,” Nemo said.

Interestingly, the Summit also drew former miners like Santiago Moser of Fuerte 256 from Venezuela, who were seeking new opportunities after a government crackdown on Bitcoin. 

In May 2024, the government of the then “Crypto Haven” nation banned all crypto mining farms connected to the national electricity grid to alleviate strain on the country’s fragile power system amid an ongoing energy crisis. As part of this effort, authorities confiscated around 2,000 mining devices in Maracay, Aragua state, during an anti-corruption initiative. This crackdown is also tied to a broader investigation involving irregularities in oil transactions linked to cryptocurrencies, leading to the arrest of officials from SUNACRIP, Venezuela's national crypto regulatory body, and a restructuring of the country’s crypto framework. 

Venezuela’s experience intimates the delicate regulatory tango many countries have had to balance in regulating Bitcoin. While the allure of foreign direct investment often entices governments, many have quickly walked back their initial gusto after experiencing unprecedented pressures like electricity shortages.

Not everyone in Ethiopia also welcomes the presence of foreign Bitcoin miners. Project Mano, an Ethiopian-led Bitcoin-focused nonprofit initiative, is among the critics.

The group claims that "foreign Bitcoin miners are robbing Ethiopia blind." In an open letter to the Ministry of Finance, Project Mano alleged that “we have witnessed foreign-owned Bitcoin miners quietly benefiting from our cheap, renewable electricity—generating immense private profits while leaving Ethiopia with only a meager trickle of foreign currency.”

The anonymous group argues that Ethiopia has a unique opportunity to leverage its vast hydroelectric capacity for Bitcoin mining rather than merely supplying power to foreign miners. Project Mano advocates for state-led Bitcoin mining and the establishment of a national Bitcoin reserve.

Nemo views government-led Bitcoin mining as a risky proposition.

"It's very tempting because, as a government, mining provides immediate cash flow. But if the government also controls power generation, there's a temptation not to pay the real value," he said during the African Bitcoin Conference two months ago.

According to Nemo, this could lead the government to divert “free electricity” for mining while obscuring the true cost of the process.

"Such Bitcoin mining benefits the Bitcoin network, but the people end up subsidizing it. We don't want African citizens subsidizing the Bitcoin network—we want the reverse," he added.