Laos is actively seeking ways to emerge from a deep debt crisis caused by extensive dam construction and is considering cryptocurrency mining as a tool for economic growth. The country has a significant surplus of electricity due to its hydropower facilities, and the government plans to direct these resources toward Bitcoin mining and other digital assets.
This is reported by Finway
Potential and Risks of Crypto Mining for Laos’ Economy
The long-standing program of building hydropower plants has allowed Laos to accumulate a substantial amount of electricity, but it has also led to state debt in the billions of dollars. Now, the authorities are trying to monetize the surplus energy through the energy-intensive business of crypto mining. According to the state publication Vientiane Times, the government views this activity as a “long-term economic opportunity” that will enable the conversion of surplus electricity into real economic profit.
However, the initiative has faced sharp criticism from environmentalists and local communities. They emphasize that dam construction has negatively impacted the environment, reduced crop yields downstream, harmed fishing, and led to the forced relocation of thousands of people.
“Laos is allowing the use of electricity for cryptocurrency mining not due to internal conditions. It is a consequence of the country being heavily indebted and unable to repay its debts,” emphasized Witun Permpongsakaroen, director of the Mekong Energy and Ecology Network.
Moreover, hydropower in Laos is seasonal: during drought periods, the country is forced to import electricity from neighboring Thailand. Human rights organization representatives claim that promises of compensation and support for displaced communities remain unfulfilled.
Shift Towards a Digital Economy and External Challenges
The Lao government has officially identified the development of the digital economy as one of its priorities until 2030. To this end, the country has already begun licensing mining and trading platforms, attempting to legalize and regulate activities that were previously conducted mostly by Chinese miners after mining was banned in China in 2021.
At the same time, in August, the state company Electricite du Laos was forced to suspend electricity supply to crypto farms due to drought, export obligations, and accumulated debts of miners. The International Monetary Fund noted in its report that the high level of public debt poses significant risks to Laos’ medium-term economic prospects, and the current policy may exacerbate inflation and complicate further development.
Residents of the country are already feeling the effects of economic instability: the national currency, the kip, has lost half of its value against the US dollar over the past five years, and the inflation rate remains high. Additionally, the situation is complicated by the new 40% tariffs imposed by the US on Lao exports, which are among the highest among Washington’s trading partners.
Laos is faced with a difficult choice: to use surplus electricity for the development of the digital economy or risk even greater environmental, social, and financial problems.