With the third Chinese region reportedly calling for the ban on crypto mining, El Salvador’s President Nayib Bukele said he has instructed a state-owned geothermal electric firm to develop a plan to offer Bitcoin mining facilities from the country’s volcanoes.
LaGeoSV’s plan is to offer mining facilities “with very cheap, 100% clean, 100% renewable, 0 emissions energy,” according to the president in a tweet. In another tweet less than 24 hours later, Bukele noted that the country’s engineers have already dug a new well for a zero emissions mining facility.
I’ve just instructed the president of @LaGeoSV (our state-owned geothermal electric company), to put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanos
This is going to evolve fast! pic.twitter.com/1316DV4YwT
— Nayib Bukele (@nayibbukele) June 9, 2021
The move didn’t come as a total surprise considering that El Salvador just became the first country to formally adopt Bitcoin as legal tender – four others said to be in line. Chinese regulatory concerns crashed crypto markets over the past two weeks but El Salvador’s vote for Bitcoin made its price rise by 12% in 24 hours.
So a push by the country to tap its unlimited renewable energy – which has been a major proposition for crypto mining of late – to solidify the idea of a decentralised monetary infrastructure that could be accessed by many from across the world fits the equation. It’s also timely as the Chinese government continues to implement its restrictive policy on crypto mining operations within China which has seen the Bitcoin network hashrate start to decline lately.
From Inner Mongolia to Sichuan and Wednesday June 9’s report that certain Bitcoin miners in Xinjiang have been instructed to shut down, a move to geographical locations where these miners can invest under a protective government policy environment would seem attractive.
Bitcoin mining is unlike extracting highly sought commodities like gold and oil which have to follow a natural trail. Mining the top cryptocurrency is possible in any country where excess energy is available and can be easily converted into value.
Meanwhile, as El Salvador would be under immense pressure to succeed with its new Bitcoin-related ventures as a pathfinder, some analysts have hinted on the inherent challenges that may face the South American country as it seeks to develop an infrastructure to encourage mainstream crypto usage.
For Sun Yang, Senior Researcher at the Suning Institute of Finance, El Salvador is afforded the opportunity to experiment boosting its financial services with Bitcoin because of its weak financial services framework and the view by large multinational financial institutions that the country is small with no incentive to set up branches there. However, since Bitcoin works without any form of regulation by central banks or financial institutions, Yang believes Bitcoin use as legal tender could pose a challenge to El Salvador when it may want to introduce some financial regulation in the future.
Wang Zhicheng, an Associate Professor of Finance at the Guanghua School of Management, Peking University, cites the current poor stability of Bitcoin, its strong atmosphere of speculation and the hard-to-control risk of unexpected market shocks as key challenges. He also notes that El Savador adopting Bitcoin as legal tender is to gain international investment attention particularly from the crypto community adding that a success with the speculation drive will make the country’s foreign exchange rise and create a domino effect for others which find it difficult to attract investors.