As reported by Bloomberg, Chinese cryptocurrency mining companies are increasingly setting up in Africa, especially in Ethiopia.
Even though trading cryptocurrencies is banned in China and Ethiopia, the African country allowed Bitcoin mining in 2022. Following China’s ban on cryptocurrency in 2021, Chinese firms have been looking for new places to set up their mining operations and have found Ethiopia appealing.
Bloomberg states that out of 21 companies dealing with Ethiopia’s sole electricity provider, 19 are from China. These miners are drawn to Ethiopia because of its low-cost electricity, which is mainly generated from hydropower. Despite this, almost half of Ethiopia’s population cannot access electricity. Additionally, Ethiopia’s mild weather is seen as a plus for mining activities, unlike in Texas, USA, where the heat increases cooling costs for mining equipment.
The report also mentions that some mining operations might disguise themselves as factories or farming projects to get electricity without the government’s approval for Bitcoin mining. However, risks include potential government policy changes that have previously affected similar operations in Iran and Kazakhstan. The political situation in Ethiopia also adds an element of uncertainty for investors.
In other parts of Africa, hydropower is being used positively, like in the Democratic Republic of Congo, where it supports a national park and its surrounding community.
