Digital assets power Bhutan’s national development

The small Himalayan kingdom of Bhutan has emerged as a major player in the global cryptocurrency market as it holds the fourth-largest Bitcoin stash among the nations.

Known for its gross national happiness (GNH) philosophy which prioritises well-being and sustainability, Bhutan took a hardnosed bet in the volatile world of cryptocurrency in 2019.

Leveraging its energy surplus back then, the government took a decision to mine cryptocurrencies to boost its sovereign wealth fund – and the move paid off.

Mining refers to the process of creating cryptocurrencies by using powerful computers to solve complex mathematical problems.

Now, the value of each Bitcoin is almost thirteen times more than what it costs in the year Bhutan started its mining operations - at around US$96,490 as of this month.

Speaking to GovInsider, Druk Holding & Investments (DHI)’s Chief Technology Officer, Jacques von Benecke said: “Our fund is now made up of about US$1.2 billion (S$1.62 billion) in digital assets.”

He added that the government cashes in on Bitcoin almost every week to finance public services and projects.

Benecke also consults for the Bhutanese government as a member of the GovTech Commission, representing the private sector.

DHI currently contributes 25 per cent to Bhutan’s national GDP. Aside from digital assets, the commercial and investment arm of the Bhutanese government has been exploring other emerging tech areas, including artificial intelligence (AI), metaverse, and blockchain.

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Building capacities of digital government

“The government and DHI innovation team run side-by-side, but we do run a few years ahead of them,” he said, highlighting that the groundwork done by DHI a few years ago have "create[d] capacity" now for Bhutan’s digital governance.

The most well-known example digital government initiative from Bhutan is the world’s first decentralised national identity platform, NDI, which was spun off as a startup that was 100 per cent owned by DHI.

With the backbone of digital governance having already been built by DHI, the government’s latest five-year plan looks to integrate NDI in public service delivery.

The second example of DHI creating capacities to spur Bhutan's economic development is through the national carbon registry. Powered by AI and blockchain, the registry will enable Bhutan to effectively and securely trade carbon credits on the global markets.

Another example is the Bhutanverse, a metaverse platform launched by the government which roped in a wide range of local collaborators, including students and artists, to contribute to the virtual world.

Disruptive tech as the standard

“Stop thinking that you're going to achieve something big by doing small increments,” was the advice given by Benecke on pushing the boundaries of government technology.

In building its pioneering digital identity project, Bhutan mustered the courage to build something that nobody else had attempted before, and now is that the rest of the world is trying to catch up building decentralised identities by 2030, he said.

“That [digital identity] has now become the sort of flagship project that we use and reference when we want to do something new. It should be either emerging or disruptive tech,” he added.

Recently, DHI also collaborated with Papua New Guinea government on the latter’s digital identity and wallet programmes, and is “close to being appointed in Rwanda as well,” said Benecke.

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POCs and sandbox approach

For a country starved of digital talent, becoming a global cryptocurrency mining powerhouse would have also been challenging.

“Crypto mining was initially sold as a proof-of-concept (POC), but it turned out to be very successful. Then we learned and grew the team.

“Now we have a [domestic] company established with a bunch of engineers, and we plan to continue to grow the mining farms over time. We also have foreign investors that run privately-owned mines in Bhutan,” he shared.

Taking a sandbox approach has allowed DHI to take a lot more risks and streamline the processes around the innovations.

“We can take bigger risks and try emerging tech, which none of the other government departments may go close to,” he added.

Reaping private sector synergies to meet public needs

Be it crypto mines or data centres, governments struggle to create a delicate balancing act of pursuing technological advancements while managing the energy consumption of such emerging tech.

“We have to make sure that we stay ahead of the energy needs,” said Benecke, adding that the rising disposable incomes in the population and the government’s plans to build a “mindfulness city” would exacerbate energy scarcity in the country.

Last month saw a public-private partnership established between Druk Green Power Corporation (DGPC), DHI’s green energy arm, and Tata Power, one of India’s largest power firms, to boost renewable energy projects.

“This is the first time that private equity or money is coming into the energy market,” said Benecke, sharing that DHI made an appeal with the government to consider private investments in the energy sector.

Typically, state-run projects take about 10 to 15 years to complete. He added that DHI is also hoping to reap the benefits of innovations by the private sector, considering that the technology in Bhutan’s existing power stations were outdated.

“Towards the end of last year to beginning of this year, the government changed the regulations so that we could have foreign investment in energy,” he explained.

The rationale for the government to own its power stations is to be able to subsidise electricity for the Bhutanese people, but Benecke said that the new regulation will include a provision to address the pricing component.

 The finance ministry has predicted that Bhutan’s energy consumption would outstrip production by 2026, as the government looks to ramp up on hydropower projects, as well as to diversify its energy portfolio.

“More than 95 per cent of the power generated is from hydropower, and we've just recently started deploying solar panels.

“So, there are a few 100-megawatt solar panels, and it'll continue to increase,” Benecke said, adding that the firm is currently doing POCs on geothermal and other forms of kinetic energy.”

Also read: Bhutan says digital transformation need not compromise citizen trust