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Laos Suspends Crypto Mining Amid Electricity Shortage and Drought

laos suspend crypto mining, Laos Suspends Crypto Mining Amid Electricity Shortage and Drought

Laos, a landlocked country in Southeast Asia, has recently announced that it will suspend all crypto mining activities in the country until further notice. The decision was made by the Ministry of Energy and Mines, which cited the severe electricity shortage and drought as the main reasons for the ban.

Crypto mining, the process of using computers to solve complex mathematical problems and generate new units of cryptocurrencies, such as Bitcoin and Ethereum, has been growing rapidly in Laos in recent years. According to a report by the International Energy Agency (IEA), Laos had the highest share of electricity consumption from crypto mining in the world in 2020, accounting for 12.5% of its total electricity demand.

The main factor that attracted crypto miners to Laos was the availability of cheap and abundant hydroelectric power, which accounts for more than 90% of the country’s electricity generation. Laos has built dozens of dams along the Mekong River and its tributaries, turning the country into a major exporter of electricity to its neighbors, such as Thailand, Vietnam, and China.

However, the situation has changed dramatically in 2023, as Laos faces one of the worst droughts in its history. The water level of the Mekong River has dropped to its lowest point in decades, affecting the livelihoods of millions of people who depend on the river for fishing, farming, and transportation. The drought has also reduced the output of hydroelectric power plants, causing frequent blackouts and power rationing across the country.

The Lao government has declared a state of emergency and urged its citizens to conserve electricity and water. It has also decided to halt all crypto mining activities, which it considers as a non-essential and wasteful use of electricity. The Ministry of Energy and Mines has ordered all crypto mining operators to stop their operations immediately and submit their reports to the authorities. Those who fail to comply will face legal actions and penalties.

How Laos’ Crypto Ban Affects the Regional and Global Crypto Markets

The crypto ban in Laos has significant implications for the regional and global crypto markets, as it affects the supply and demand of cryptocurrencies. According to data from Cambridge Bitcoin Electricity Consumption Index (CBECI), Laos contributed about 0.8% of the global Bitcoin hash rate in August 2023, ranking 15th among all countries. Hash rate is a measure of the computing power used to secure and validate transactions on the Bitcoin network.

The suspension of crypto mining in Laos means that a large amount of hash rate will be removed from the network, making it less secure and more vulnerable to attacks. It also means that fewer new Bitcoins will be generated, reducing the supply of the cryptocurrency. This could lead to an increase in transaction fees and a decrease in transaction speed on the network.

On the other hand, the crypto ban in Laos could also create an opportunity for other countries that have more favorable conditions for crypto mining, such as lower electricity costs, higher renewable energy sources, and more supportive regulations. Some of the crypto miners in Laos may relocate their operations to these countries, increasing their share of hash rate and boosting their crypto industry.

For example, Kazakhstan, which ranked fourth in global Bitcoin hash rate in August 2023 with 8.2%, has seen a surge of crypto mining activities after China cracked down on crypto mining earlier this year. Kazakhstan offers cheap coal-fired power and a friendly regulatory environment for crypto miners. Similarly, Iceland, which ranked ninth with 2.8%, has also attracted many crypto miners with its abundant geothermal and hydroelectric power and its progressive stance on cryptocurrencies.

The crypto ban in Laos also reflects the divergent attitudes and policies of different countries towards crypto mining and cryptocurrencies in general. While some countries see them as an opportunity for innovation and economic development, others see them as a threat to their national security and environmental sustainability.

For instance, China, which used to dominate the global crypto mining industry with more than 65% of hash rate in 2020, has banned all crypto mining activities in 2021, citing concerns over financial risks, energy consumption, and carbon emissions. China’s crypto crackdown has caused a massive exodus of crypto miners from the country, disrupting the global crypto market and affecting the price and stability of cryptocurrencies.

On the contrary, some countries have embraced crypto mining and cryptocurrencies as a way to diversify their economies, attract foreign investments, and foster innovation. For example, El Salvador, which became the first country to adopt Bitcoin as legal tender in 2021, has announced plans to use geothermal energy from volcanoes to power crypto mining facilities. El Salvador’s president, Nayib Bukele, has claimed that this will create jobs, boost tourism, and promote financial inclusion in the country.

The crypto ban in Laos is another example of how different countries are responding to the challenges and opportunities of crypto mining and cryptocurrencies in different ways. It also shows how crypto mining and cryptocurrencies are not only a technical or economic phenomenon, but also a social and political one, involving various stakeholders and interests.

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