Power surplus and debt-ridden, is Laos turning to Bitcoin mining?

Author: SCMP

Compiled by: Ivan Wu said blockchain

Drowning in debt and facing excess electricity, "the batteries of Southeast Asia" are turning their attention to energy-intensive cryptocurrency mining to seek profit.

Laos aims to become the "battery of Southeast Asia." Years of large-scale construction of hydropower dams have led to an oversupply of electricity in the country, but also brought a rapidly rising debt burden.

Nowadays, in order to convert excess electricity into economic benefits, the government has begun to introduce energy-intensive cryptocurrency mining operations — this move has not only attracted international attention but has also sparked controversy domestically.

In the multi-billion dollar digital asset mining industry, participants earn tokens such as Bitcoin as rewards by solving complex blockchain algorithm challenges, which is known for its high energy consumption.

However, Laos has built dozens of hydropower projects on the Mekong River and its tributaries, and now the power supply has exceeded the level that the market can absorb.

Government trade data shows that electricity accounted for 26% of Laos' total exports last year. This landlocked country, which has long been among the poorest in Southeast Asia, is selling cheap hydropower to its Asian neighbors that are hungry for energy to achieve climate goals.

However, the current wave of hydropower construction comes at a high cost. Environmentalists warn that the dams are damaging the ecological health of rivers, harming downstream agriculture and fisheries that rely on high sediment water bodies, and forcing tens of thousands of people — possibly even hundreds of thousands — to relocate.

Critics argue that this policy sacrifices local livelihoods and ecosystems in the face of questionable economic returns.

At the same time, Laos's debt continues to accumulate. The International Monetary Fund states that a large portion of the dam financing comes from Chinese loans and foreign enterprises, but due to Laos's lack of transmission infrastructure to export surplus electricity, the investment returns are slow.

Laos officials are currently seeking new ways to monetize idle electricity. The state-run Vientiane Times reported after a high-level meeting that decision-makers are exploring "long-term economic opportunities," including "transforming the country's surplus electricity into economic value through digital asset mining."

While regulatory authorities remain cautious about the risks of volatile digital assets, Laos has begun issuing licenses for local cryptocurrency trading platforms and mining operations.

At the time this measure was introduced, the general public was facing persistently high inflation, and the Lao kip has depreciated by about half against the US dollar over the past five years.

Adding to the woes, the United States has recently imposed a 40% tariff on exported goods from Laos, which is the second highest level among Washington's trading partners.

As of July 12, U.S. President Donald Trump announced new tariff rates on dozens of economies and extended the tariff deadline to August 1, 2025.

Many environmental advocates believe that the shift to cryptocurrency mining is a manifestation of the flaws in energy policy — this policy has burdened Laos with debt and is unable to absorb its excess electricity.

"Allowing the use of electricity for cryptocurrency mining is clearly not driven by domestic conditions," said Witoon Permpongsacharoen, head of the Mekong Energy and Ecology Network. "This practice originates from Laos' heavy debt and inability to repay."

Ironically, Laos generates excess electricity during the rainy season, but has to purchase electricity from neighboring countries when hydropower output declines during the dry season.

Pianporn Deetes from International Rivers stated: "Most of Laos's hydropower supply is seasonal; during the dry season, Laos will repurchase electricity from Thailand."

Dittus stated that for the communities relocated for the construction of reservoirs and dams, the promised improvements in living conditions have mostly not been fulfilled; many have not welcomed prosperity, but instead face greater difficulties.

She said that Laos faces the risk of "taking its rich natural resources away from the people, making their situation worse rather than better."

Nevertheless, amid the changing winds of global trade, the government's involvement in cryptocurrency mining has attracted widespread attention in the region seeking new sources of growth.

Laos aims to become a mature digital economy by 2030 and is expected to be removed from the United Nations' list of "least developed countries" next year.

Despite China — Laos's powerful northern neighbor — banning cryptocurrency mining and trading in 2021 due to concerns over financial stability, Laos has become an attractive destination for Chinese miners due to its low electricity prices, which even includes some illegal activities.

The latest measures of the Lao government aim to bring relevant activities under official regulation by issuing licenses and collecting industry taxes.

The International Monetary Fund believes that monetizing surplus electricity makes economic sense, but challenges still exist.

The IMF warned in November last year that Laos's "public debt level is significant and poses challenges to the medium-term economic outlook"; under current policies, "inflation and debt revaluation may worsen, meaning a significant drag on growth over a longer period."