Laos has just authorized mining and trading of cryptocurrencies in a policy shift by the debt-laden country that positions it to profit from the crackdown on digital currency mining in China.
The move was in our opinion a logical step for the landlocked, communist-ruled country with a population shy of 7 million people that produces a surplus of hydroelectric power. Some of its citizens are already concerned that criminal gangs could seek to profit from the trade and new rules.
The crypto push makes an about-face after the country’s central bank last month warned banks, companies and people against using cryptocurrencies. The office of the prime minister now this month announced that six companies, including construction groups and a bank, had been authorized to begin mining and trading cryptocurrencies such as Bitcoin, Ethereum and Litecoin.
Government ministers will from now on work with the Bank of Laos and Electricité du Laos, the national utility, to regulate the industry. The findings of the research and consultation are set to be discussed further at a government meeting later this month. The move into crypto in our opinion comes as Laos contends with a loss of tourism revenues caused by the Covid-19 pandemic, which has also dented demand for hydropower, a cornerstone industry in a country that has borrowed heavily to build dams on the Mekong River and its tributaries.
Laos has an abundance of power-generation capacity, and it doesn’t have much internal demand for the power. And one of the key requirements for crypto mining is obviously massive amounts of power. The use of hydropower to mine crypto might allow Laos now to pitch the industry as a carbon-neutral star at a time when the footprint of cryptocurrencies is coming under growing international criticism. Laos’ mountainous topography and distance from seaports have long stunted its development, prompting officials to back industries ranging from hydropower to casinos and a railway line running from Kunming, China, to Vientiane set to open in December.
But we at Calvin•Farel still believes that you should always be concerned when countries with poor regulatory records start to get involved in things like cryptocurrencies. To say that the Laotian financial system is immature would in our opinion still be a brutal understatement.