- Laos halts the supply of electricity to crypto mining projects in the country.
- The move follows the prevailing drought that has increased demand for electricity by local consumers.
- Crypto mining projects have reportedly also failed to clear their outstanding power bills.
Laos through its government-owned electricity distributor, Électricité du Laos (EDL), has announced that the country’s crypto-mining facilities will no longer receive electricity following a shortage as a result of the ongoing drought.
The electricity company stated in an official announcement that Laos has been experiencing a drought since the year began. Due to the extreme heat in this season, there has been an increased demand for electricity to power air conditioners and other appliances.
At the same time, the drought has also dried up water sources causing a drastic reduction in the amount of power hydroelectric power plants have been producing.
Aside from the drought, Laos has been planning to export hydroelectric power to Thailand by 2024. According to the EDL, these plants supply 95% of the country’s power and if the drought continues, there will barely be enough to sustain the export project that the country has been working on.
As such, the country has had to shift priorities and has decided that there is no longer enough power to facilitate crypto mining activities which are well known for their intensive power consumption.
The government and power distributors have chosen to cut their supply to crypto miners as they have proven a less profitable venture than the remaining power consumers. In an interview with a local media outlet, the Laotian Times, an EDL employee revealed that another reason for the suspension of supply for crypto mining projects is their inability to “pay their outstanding balances.”
A Deal Gone Sour
Laos’ venture into the crypto landscape was made through a significant step in September 2021 to fully regulate cryptocurrency mining and trading. The step also included the intention to provide incentives to companies that are licensed and run operations there in order to encourage more crypto activities that would benefit the Asian country’s economy.
The action was interpreted as an effort to position the nation as the upcoming hub for mining digital assets given China’s current mining crackdown. Around that time, China had halted mining activities in a number of cities due to massive energy usage and environmental concerns.
As part of the program, the Laos government issued licenses to six companies to trade and mine cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC).
In order for these crypto companies to be eligible for incentives, they must be entirely owned by Laos and deposit a $5 million security with the Bank of Laos, stated the Laos Minister of Communications and Technology, Boviengkham Vongdara.
In return, the crypto mining companies would be provided with a minimum of 10 megawatts of electricity on a contract that is renewable every six years. The companies would also be given an EDL exemption from import and transmission taxes.
However, due to the prevailing issues as a result of the mining activities as well as climatic changes, the contract is being suspended barely two years later.
Recent months have seen the fate of crypto mining activities become uncertain in many jurisdictions as governments have been calling for a significant reduction in the amount of electricity provided to miners.
While the reasons vary in various countries, most of the suspensions have been a result of numerous reports criticizing the crypto industry’s high energy consumption.
The US for instance under the leadership of Biden has imposed a 30% crypto mining tax citing climate and energy concerns on other users.
