The Secret Bitcoin Investment of Bhutan’s Sovereign Wealth Fund

On April 17th, according to court documents, in the past year, the Royal Government of Bhutan’s sovereign wealth fund Druk Holdings&Investments has invested tens of millions of dollars in Bitcoin, Ethereum, and other digital assets, and it is a client of bankrupt cryptocurrency lenders BlockFi and Celsius, but it has never publicly disclosed these two points. It is reported that the fund holds assets of $2.9 billion. (Forbes)

Forbes: Bhutan’s sovereign wealth fund Druk has secretly invested tens of millions of dollars in cryptocurrency over the past year

Bhutan, a small Himalayan kingdom, is known for its focus on gross national happiness rather than gross domestic product. However, the country has recently been making news in the international financial scene due to the secret investment of its sovereign wealth fund, Druk Holdings & Investments (DHI), in Bitcoin, Ethereum, and other digital assets. In the past year, court documents reveal that DHI has invested tens of millions of dollars in cryptocurrencies while being a client of cryptocurrency lenders BlockFi and Celsius. However, the fund has never publicly disclosed these investments.

Understanding Bhutan’s Sovereign Wealth Fund

Before delving into the details of DHI’s secret cryptocurrency investments, it’s essential to understand what a sovereign wealth fund is and how it operates. A sovereign wealth fund is a state-owned investment fund that is used for long-term investment purposes. These funds are primarily accumulated from surplus reserves of foreign exchange reserves, natural resources, or other national assets. Besides generating revenue from interest and capital gains, sovereign wealth funds also help national governments stabilize their economies during times of crisis. Bhutan’s DHI is one such sovereign wealth fund that controls and manages the investments of different state-owned companies in the country.

DHI’s Investment in Cryptocurrencies – An Unusual Move

The news of DHI’s investment in Bitcoin and Ethereum came as a surprise to many industry insiders. While several other sovereign wealth funds around the world have invested in cryptocurrencies, DHI’s investment is significant for two reasons. Firstly, Bhutan is a predominantly Buddhist country that has an unwritten law against gambling and speculation. The investment in a highly speculative asset like Bitcoin goes against this cultural norm. Secondly, DHI’s investment is in stark contrast to Bhutan’s economic model that puts emphasis on environmental conservation and sustainable development. Critics argue that investing in cryptocurrencies that have massive carbon footprints contradicts the country’s environmental policies.

The Role of Bankrupt Cryptocurrency Lenders

Bhutan’s sovereign wealth fund is not investing in digital assets directly; instead, it is a client of two cryptocurrency lenders, Celsius and BlockFi. The role of these lenders is to provide loans to institutional investors, high net worth individuals, and companies that want to invest in cryptocurrencies. These lenders also offer interest-earning accounts, cryptocurrency-backed loans, and other crypto-related financial services. BlockFi and Celsius are just two of the many cryptocurrency lenders that have emerged in recent years and have gained popularity due to their high-interest rates and easy-to-use interface.

The Controversy Surrounding DHI’s Investments

The news of DHI’s secret Bitcoin and Ethereum investments has raised several questions from industry experts, policymakers, and citizens alike. Firstly, there are concerns about the lack of transparency surrounding DHI’s investments. Since DHI is a sovereign wealth fund that is managed by the government, critics argue that the investment decisions should be made public. There are also questions about the legality of investing in cryptocurrencies in Bhutan. The country does not have any specific regulations around cryptocurrencies, and it’s uncertain whether the government will introduce any regulation in the future.

Conclusion

The news of Bhutan’s sovereign wealth fund investing in Bitcoin and Ethereum might have surprised many, but it’s a sign of the changing times. Cryptocurrencies, while still a highly speculative asset, have gained acceptance among institutional investors and governments worldwide. The move by DHI to invest in cryptocurrencies might have raised a few eyebrows, but it’s ultimately up to the government and people of Bhutan to decide whether it’s a wise decision. Nevertheless, DHI’s investments in cryptocurrencies are another example of the growing interest in the digital asset class.

FAQs

1. Is it legal to invest in cryptocurrencies in Bhutan?
– Currently, Bhutan does not have any specific regulations around cryptocurrencies, and it’s uncertain whether the government will introduce any regulation in the future.
2. What is Druk Holdings & Investments?
– Druk Holdings & Investments (DHI) is a sovereign wealth fund that controls and manages the investments of different state-owned companies in Bhutan.
3. What are cryptocurrency lenders, and how do they operate?
– Cryptocurrency lenders provide loans to institutional investors, high net worth individuals, and companies that want to invest in cryptocurrencies. They also offer interest-earning accounts, cryptocurrency-backed loans, and other crypto-related financial services.