Thursday, February 29, 2024
NewsOfficials hit pause on cryptocurrency mining permits as entrants ready to start...

Officials hit pause on cryptocurrency mining permits as entrants ready to start operations

  • More than 20 firms ink power purchase deals with EEP

Ethiopian authorities have temporarily suspended the issuance of new operation permits for cryptocurrency mining ventures after awarding permits to no less than 21 firms.

Officials say the suspension will remain in place until there are clear indications that the firms already awarded permits have made good progress in implementation. Nineteen of the 21 firms are foreign-owned, while two are domestic.

Bitcoin is a digital currency that works not through central banks but ledgers operated by block chain technology. It requires powerful computers to process the huge amounts of data in real time, which, in turn, translates to vast energy needs.

As cryptocurrency mining becomes more commonplace, miners are looking around the globe for host countries where electricity is cheap. Ethiopia has emerged on their radar for the first time.

Officials at the Information Network Security Agency (INSA), Ethiopian Electric Power (EEP), Ethiopian Investment Commission (EIC), National Bank of Ethiopia (NBE), among others, are in charge of the licensing process. Investors must obtain a license from EIC before filing a request for power supply from EEP. INSA screens all applicants and their business plans before giving the go-ahead for a power purchase agreement with EEP.
A national committee comprising officials from these institutions has also been set up.
“We’ve reached a power purchase agreement with the 21 companies,” Hiwot Eshetu, marketing and business development manager at EEP, told The Reporter. “But we do not start supplying energy until all stakeholder institutions give their approval.”

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Hiwot disclosed the power purchase agreement entails a tariff of USD 3.14 cents per kilowatt hour – much higher than household electricity tariffs. The data mining companies have also agreed to pay the tariffs in foreign currency.

It marks the first time the Ethiopian government grants licenses to foreign cryptocurrency mining companies. Sources familiar with the developments observe the nearing completion of the GERD is behind the spike in interest from foreign firms.

Hiwot disclosed there are “a lot” of applications in queue, but the government has decided to place a temporary suspension on the issuance of new cryptocurrency mining permits.

“We do not grant licenses just because we want to sell energy. We need to first make sure the business does not affect supply for local energy consumption,” she told The Reporter.
Ethiopia’s aggregate energy generation capacity stands near 5,000 MW, with the government ambitiously targeting 17,000 MW by 2030.

A recent article from Bloomberg alleges the data miners are setting up their farms in the vicinity of GERD. Officials say this is untrue.

“There isn’t a single data mining firm setting up near GERD. It is misleading information. Most of the licensed companies requested plots near Addis Ababa and regional towns where there is infrastructure. Most of them will be located in areas where there are EEP power distribution stations,” said Hiwot. “After all, they get the energy supply from the national grid, not directly from GERD.”

Sources disclosed that most of the 21 licensed firms are Chinese.

“Most of the people at the front are Chinese. But in the background are also other foreign investors,” Hiwot told The Reporter.

The Ethiopian government is considering boarding local investors onto the Bitcoin data mining business, instead of foreign investors.

“The data mining business is a mobile business, globally. These companies can leave Ethiopia at any time and move to other countries. Therefore, we need to grant licenses to local firms. That is why we temporarily suspended licensing,” said Hiwot.

Even though Ethiopia’s financial laws do not allow digital currencies like Bitcoin in the country, Bitcoin data mining is not prohibited.

“These companies cannot use the currency in Ethiopia. That is controlled by the central bank. They can only mine the data,” said Hiwot.

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Video from Enat Bank Youtube Channel.


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