In recent years, Ethiopia has positioned itself as an attractive hub for Bitcoin mining, drawing global attention due to its exceptionally low electricity costs—reportedly as low as 3.2 cents per kilowatt-hour. This affordability, largely powered by the country’s vast hydropower resources, including the Grand Ethiopian Renaissance Dam (GERD), has led to an influx of foreign mining companies eager to capitalize on cheap energy.
At first glance, the numbers seem promising. The state-owned Ethiopian Electric Power (EEP) has generated $55 million in revenue from Bitcoin miners in a single year, with projections suggesting this could more than double to $123 million in the near future. Ethiopia’s share of the global Bitcoin network’s hash rate reached 2.5% by the end of 2024 and is expected to climb further. Meanwhile, over 25 Bitcoin mining firms and 40+ data service providers have officially registered, signaling the sector’s rapid expansion as regulations evolve.
Yet, beneath these impressive figures lies a deeper, more contentious debate—one that raises critical questions about national priorities. By late 2024, Bitcoin mining was consuming approximately 600 megawatts (MW) of electricity, nearly 11% of Ethiopia’s total generation capacity of 5,200 MW. This is a staggering allocation of energy in a country where over 40% of the population still lacks reliable access to electricity.
Ethiopia has taken an unconventional approach to cryptocurrency, outright banning its use for financial transactions while actively permitting and regulating Bitcoin mining. The rationale? Mining companies must pay for electricity in foreign currency primarily U.S. dollars providing the government with a much-needed source of hard currency. Given Ethiopia’s persistent foreign exchange shortages, the strategy appears financially sound on paper. However, this raises a fundamental question: Is Ethiopia truly maximizing the economic potential of its resources, or are these gains disproportionately benefiting foreign firms rather than the Ethiopian people?
The regulatory framework reflects an attempt at control. The Information Network Security Administration (INSA) oversees mining operations, requiring all participants to register, secure approvals for importing mining hardware, and obtain power purchase agreements with EEP. Yet, even with these measures, the broader implications of Ethiopia’s mining policies remain unclear.
Critics argue that prioritizing Bitcoin mining over broader electrification efforts undermines national development. The 600 MW allocated to mining could be redirected to industrial growth, agriculture, or expanding access to millions still living without power. On the other hand, proponents contend that if revenues are properly managed, Bitcoin mining could serve as a catalyst for infrastructure investment, ultimately improving energy access across the country.
Ethiopia stands at a crossroads. As Bitcoin mining expands and regulatory policies evolve, the government faces a crucial decision: will the industry be leveraged to create lasting benefits for Ethiopian society, or will it primarily serve as a lucrative loophole for foreign entities seeking cheap power?
One of the most glaring issues is the lack of transparency around how Bitcoin mining revenues are structured. Unlike other industries that generate foreign exchange—such as coffee exports, which have clear tax and regulatory structures—Bitcoin mining operates in a legal gray area.
Many of the mining companies operating in Ethiopia are foreign-owned and export their earnings rather than reinvesting locally. While they pay for electricity in foreign currency, the actual Bitcoin they mine remains largely outside Ethiopia’s financial system. This means that while Ethiopia provides the power, it doesn’t benefit from the most valuable output: the mined Bitcoin itself.
In contrast, other countries have taken a more aggressive approach. Countries like Kazakhstan, Iran, and El Salvador provide valuable lessons on how governments can leverage Bitcoin mining to their advantage.
Kazakhstan: Turning Bitcoin Mining into a Revenue Stream
Kazakhstan initially became a hotspot for Bitcoin miners due to its low electricity costs and welcoming regulatory environment. However, as mining operations surged, the country faced widespread power shortages and infrastructure strain. In response, the government took a more aggressive stance by:
- Raising electricity tariffs for mining companies, ensuring that they paid significantly more per kilowatt-hour than other industries.
- Imposing new taxes on mining revenues, requiring miners to contribute directly to government income.
- Shutting down unlicensed mining operations to curb illegal energy consumption and ensure proper oversight.
These measures helped Kazakhstan capture a larger share of mining profits while protecting its energy supply. By 2022, the country had collected over $1.5 billion in tax revenue from the mining sector, demonstrating that a well-regulated approach can turn Bitcoin mining into a substantial revenue stream.
Iran: Using Bitcoin for Economic Resilience
Iran has taken an entirely different approach, integrating Bitcoin mining into its national economic strategy to counter international sanctions and foreign exchange shortages. The government’s state-backed model ensures that Bitcoin mining directly benefits the economy through:
- Mandating that miners sell a portion of their Bitcoin earnings to the government, allowing Iran to use cryptocurrency for international trade and bypass restrictions on foreign transactions.
- Subsidizing electricity for state-approved miners while cracking down on unauthorized mining operations.
- Using Bitcoin reserves to import essential goods, reducing reliance on traditional financial systems.
This strategy has allowed Iran to generate hundreds of millions of dollars in alternative foreign exchange while ensuring that mining revenues remain within the country. Unlike Ethiopia, which primarily benefits from electricity sales in foreign currency, Iran directly accumulates Bitcoin and uses it as an economic asset.
El Salvador: A Bold Experiment in State-Owned Bitcoin Mining
El Salvador has taken perhaps the most radical approach, making Bitcoin legal tender and establishing state-run Bitcoin mining facilities. The country’s strategy focuses on:
- Government-operated mining farms powered by geothermal energy from its volcanic resources, reducing environmental impact.
- Retaining 100% of the Bitcoin mined, allowing the country to build a national cryptocurrency reserve rather than letting foreign companies take the profits.
- Attracting foreign investment in Bitcoin-related businesses by creating a regulatory framework that supports innovation.
While this approach remains experimental, El Salvador has positioned itself as a global leader in Bitcoin adoption. The country’s Bitcoin reserves have grown, and its geothermal mining operations ensure minimal energy trade-offs, unlike Ethiopia, where Bitcoin mining consumes electricity that could be used for industrial growth or electrification projects.
The Hidden Costs: What Ethiopia Sacrifices for Bitcoin Mining
While Ethiopia’s Bitcoin mining industry brings in much-needed foreign exchange, the country is paying a steep price one that goes beyond lost revenue. The rapid expansion of mining operations has created unintended consequences that could undermine Ethiopia’s long-term economic and developmental goals.
Powering Bitcoin While Ethiopians Remain in the Dark
Ethiopia’s energy sector faces a paradox: the country generates 5,200 MW of electricity, mostly from hydropower, yet more than 40% of Ethiopians still lack reliable access to electricity. In rural areas, families rely on firewood, while small businesses struggle with frequent power outages.
Despite this pressing need, Bitcoin mining companies have secured priority access to electricity, consuming a staggering 600 MW—nearly 11% of the nation’s total energy supply. This means that while mining farms run 24/7, industries that could generate jobs and foster economic growth are left with unreliable power supply. Ethiopia’s ambitious industrialization plans require stable and affordable electricity, yet the current policy favors Bitcoin mining over sectors that directly benefit the population.
A Tax-Free Industry in a Country That Needs Revenue
Ethiopia heavily relies on tax revenue from industries like coffee exports and manufacturing. These businesses contribute to infrastructure projects, public services, and economic development. However, Bitcoin mining operates in a regulatory gray area, allowing mining companies to benefit from Ethiopia’s low energy costs without contributing their fair share in taxes.
Unlike traditional industries, which pay export duties, VAT, and corporate income taxes, Bitcoin miners only pay for electricity often at discounted rates. This creates a significant missed opportunity for government revenue, as millions of dollars flow out of the country while Ethiopia struggles to fund essential services like healthcare, education, and infrastructure.
An Unseen Environmental and Infrastructure Burden
Bitcoin mining in Ethiopia may seem environmentally sustainable, given its reliance on hydropower. However, the large-scale consumption of electricity by mining farms comes at a cost. Ethiopia’s national electrification projects require long-term investments in infrastructure, grid expansion, and maintenance. The more energy-intensive mining operations grow, the more strain they place on an already fragile energy system.
Moreover, hydropower—Ethiopia’s primary energy source—is highly vulnerable to climate change. In dry seasons or periods of drought, power production declines, making every megawatt a valuable resource. Prioritizing Bitcoin mining over more critical sectors could leave the country in a precarious position when energy shortages arise.
A Regulatory Blind Spot That Favors Foreign Companies
Ethiopia’s regulatory framework for Bitcoin mining focuses on monitoring and registration rather than maximizing economic benefits. While miners must register with the Information Network Security Administration (INSA) and sign power purchase agreements with Ethiopian Electric Power (EEP), there is no requirement for them to reinvest in the local economy.
In contrast, other resource-based industries in Ethiopia such as agriculture and mining must comply with strict regulations that ensure a portion of their earnings stay in the country. Bitcoin mining, however, remains largely untouched by such measures, allowing foreign-owned mining farms to extract wealth without meaningful reinvestment.
The Bigger Picture: A Trade-Off Ethiopia Cannot Ignore
Ethiopia’s Bitcoin mining boom is not just about electricity costs or foreign exchange earnings—it is a fundamental question of national priorities. Every kilowatt-hour allocated to Bitcoin mining is a kilowatt-hour not used to power homes, factories, schools, or hospitals. Every dollar that leaves the country in untaxed mining profits is a dollar not invested in Ethiopia’s future.
If Ethiopia wants to truly benefit from Bitcoin mining, it must rethink its approach ensuring that the industry contributes to national development rather than becoming a hidden drain on its economy.
As mining companies expand their operations, Ethiopia must rethink its strategy. Simply earning foreign currency for electricity sales is not enough—the government must ensure that Bitcoin mining contributes meaningfully to Ethiopia’s economic growth, rather than draining its energy resources without fair compensation.
