Southeast Asian Laos has officially approved the mining and trading of cryptocurrencies. It comes as part of a policy shift aimed at capitalizing on China’s mining ban – and bringing profits to the debt-ridden country.
Analysts are betting the “smart” move will boost the economy of the communist-ruled country of 7 million people. The fact that Laus produces huge surpluses of hydroelectric power is certainly coming in handy as well.
However, some experts warn that criminal gangs may jeopardize the move. They will try to profit from the new resolutions.
This push comes after the country’s central banks warned individuals and businesses about the use of cryptocurrencies.
Cryptocurrency is expected to save the country’s economy
Laos’ prime minister has given the green light to six companies, including banks and construction firms, to mine and trade Bitcoin, Ethereum and Litecoin.
To regulate the highly volatile crypto industry, the government now needs to work with the Bank of Laos and the national power utility Electricité du Laos. The government plans to deliberate and make further plans in a meeting next month.
The cryptocurrency is expected to save the debt-ridden country from the Covid 19 crisis. The pandemic has severely affected demand for hydropower – a cornerstone of Laos’ economy. The country is struggling with debts incurred to finance dam construction.
Although Laos produces a huge surplus of hydropower, there is little internal demand in the country. This explains the country’s recent approval of cryptocurrency mining and trading, which requires huge amounts of energy.
Crypto mining with hydropower is carbon neutral
Laos is perhaps the only country that can use hydropower for mining cryptocurrencies to such an extent. As a result, the country is planning an initiative to designate the industry as “carbon neutral.” This comes at a time when the carbon footprint of cryptocurrencies is being heavily criticized on an international level.
The mountainous topography and the long distance to seaports have stunted the growth of the Lao economy over the years. This has led the government to use hydropower to run casinos and a number of other industries.
In December, Laos is scheduled to inaugurate a hydroelectric-powered railway line. It will run from Kunming to China and on to Vientiane.
So mining and trading cryptocurrencies will become a source of revenue for the government. And probably even help to balance the high debt mountain of $14 billion.
Lately, the Financial Action Task Force, the UN and the US have been scrutinizing Laos for drugs and crime. However, the country has promised to step up efforts to combat these vices.
Experts also warn that Laos’ weak financial system is embracing cryptocurrencies too early. They claim the country has inadequate regulatory systems to jump into digital currencies.