Ethiopia, Africa’s second-largest country, is witnessing a Bitcoin (BTC) mining boom fueled by power agreements with Chinese firms. Colin Wu, a prominent Chinese cryptocurrency journalist, reported that Ethiopia, with a population of 115 million, now has more than 1.8 million cryptocurrency users. The Ethiopian Energy Authority has entered into power agreements with 21 Bitcoin mining companies, 19 of which are from China. Local mobile money platforms have already enabled users to buy and sell cryptocurrencies and stablecoins through Binance and Paxful.
The Evolution of Ethiopia’s Stance on Crypto
In June 2022, Ethiopia’s central bank, the National Bank of Ethiopia (NBE), declared cryptocurrency trading illegal. The NBE cited concerns about financial instability, money laundering, and the lack of regulation surrounding crypto assets. This move reflected the anxieties of many African central banks worried about cryptocurrencies undermining national currencies and centralized financial control.
However, in August 2022, the Ethiopian government signaled a shift in policy. The Information Network Security Agency (INSA) issued a directive requiring all cryptocurrency operators to register with them, warning that unregistered crypto players would be prosecuted. This marked a transition from an outright ban to a more regulated approach, aiming to harness the benefits of cryptocurrencies while mitigating potential risks.
Crypto Adoption and Regulatory Framework
Despite the NBE’s initial ban, crypto adoption has continued to grow in Ethiopia. The government recognizes the potential benefits of cryptocurrencies, such as facilitating cross-border payments and enhancing digital identity systems. INSA and other entities are formulating guidelines to supervise the economic and environmental implications of the crypto sector. Interest in foundational technologies like blockchain is also growing, with developers, entrepreneurs, and government officials exploring its applications beyond finance.
One of the most notable blockchain initiatives in Ethiopia is the digital student identity program implemented by Input Output Global (IOG) under the Cardano blockchain across more than 3,000 schools. This partnership aims to create a national database of student and teacher credentials using a decentralized digital identity solution. By digitizing educational records and storing them on a blockchain-based platform, Ethiopia aims to eliminate the risk of tampering or falsification, ensuring the authenticity of academic qualifications.
Power Deals and Bitcoin Mining
Ethiopia’s capital, Addis Ababa, has emerged as an attractive destination for Bitcoin miners due to its abundant supply of cheap electricity and relatively low operating costs. Ethiopia possesses approximately 5,200 MW of installed generation capacity, primarily from hydropower, which accounts for about 90% of the total. The Grand Ethiopia Renaissance Dam (GERD), nearing completion, is expected to add 5,150 MW of installed capacity.
The Ethiopian Energy Authority has struck power deals with 21 Bitcoin mining companies, 19 of which are Chinese. This surge in mining activity is partly due to China’s ban on crypto trading and mining in 2021, which drove Chinese miners to seek more favorable environments. Ethiopia permits Bitcoin mining because the companies pay for electricity in foreign currency, bolstering the country’s foreign exchange reserves.
Impact on Financial Inclusion and Mobile Money
Ethiopia has historically struggled with limited financial inclusion, with traditional banking services failing to reach the majority of the population. The advent of mobile money is reshaping this narrative. Kenyan mobile money platform M-Pesa entered the Ethiopian market in 2023, expanding rapidly and now covering 33% of the population. M-Pesa’s integration with major crypto exchanges like Binance and Paxful has further spiced up crypto adoption in the country.
Ethio Telecom’s Telebirr, with more than 34 million subscribers, and M-Pesa’s innovative services are making it easier for Ethiopians to engage with cryptocurrencies. M-Pesa allows users to buy and sell crypto using a familiar platform, reducing the learning curve and increasing comfort levels for people considering crypto.
Ethiopia’s journey from banning cryptocurrencies to cautiously exploring their potential is a case study in navigating the complexities of a rapidly evolving technological landscape. The country’s regulatory approach aims to balance innovation with the responsibility to protect citizens and maintain financial stability.
The recognition of blockchain’s potential for secure and transparent transaction recording has fueled interest in exploring its applications beyond cryptocurrencies. Efforts like the digital identity project and power deals for Bitcoin mining highlight Ethiopia’s strategic moves to leverage emerging technologies for economic growth and development. As the country continues to refine its regulatory framework and embrace technological innovation, Ethiopia could become a significant player in the global crypto and blockchain ecosystem.