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The Royal Government of Bhutan’s Sovereign Wealth Fund Invests Millions in Bitcoin and Cryptocurrencies

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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 dol

The Royal Government of Bhutans Sovereign Wealth Fund Invests Millions in Bitcoin and Cryptocurrencies

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

Introduction

Bhutan, a landlocked country in South Asia known for its stunning landscapes and Gross National Happiness, has made an unexpected foray into the world of cryptocurrencies. According to court documents dated April 17th, 2021, the Royal Government of Bhutan’s sovereign wealth fund, Druk Holdings & Investments (DHI), has invested tens of millions of dollars in Bitcoin, Ethereum, and other digital assets. This comes as a surprise as the Bhutanese government has always been cautious about new technologies and the potential risks they pose. The purpose of this article is to explore why the Bhutanese government’s sovereign wealth fund has decided to invest in cryptocurrencies, what impact this could have on Bhutan’s economy, and whether it is a wise investment decision.

Why Has Bhutan’s Sovereign Wealth Fund Invested in Cryptocurrencies?

The official reason for DHI’s cryptocurrency investments is yet to be disclosed by the government, but there are a few possible reasons why they may have decided to enter the crypto market. Firstly, the global pandemic has severely impacted Bhutan’s tourism industry, which makes up a significant portion of the country’s revenue. Cryptocurrencies offer a potentially lucrative alternative to traditional investments in such uncertain times. Secondly, Bhutan is heavily reliant on India for its imports and exports, and the adoption of cryptocurrencies could help lessen this dependence by enabling cross-border transactions in a more cost-effective and secure manner. Finally, investing in cryptocurrency aligns with Bhutan’s goal of becoming a digital society and adopting new technologies that can potentially benefit the country.

The Risks and Benefits of Cryptocurrency Investments

Investing in cryptocurrencies is not without risks, and the Bhutanese government’s decision to allocate a significant portion of its sovereign wealth fund to this asset class should not be taken lightly. The cryptocurrency market is highly volatile and subject to frequent price fluctuations, making it a risky investment. This can result in significant losses for investors, including governments. Additionally, the anonymity of cryptocurrency transactions makes it easier for money laundering and illegal activities, which could tarnish Bhutan’s reputation.
That said, there are potential benefits to cryptocurrency investments. Cryptocurrencies offer a higher degree of liquidity compared to traditional assets, and they are not tied to a particular geographic location, making cross-border transactions more convenient. Furthermore, since cryptocurrencies are decentralized, they are not subject to government control, which is a double-edged sword. While it increases the risk, it also removes intermediaries, thereby reducing transaction fees.

DHI’s Investment in Bankrupt Cryptocurrency Lenders BlockFi and Celsius

According to Forbes, the DHI has invested in two bankrupt cryptocurrency lenders, BlockFi and Celsius, but has not publicly disclosed this information. This is concerning, given the reputation of these two entities. BlockFi and Celsius are both high-risk investments, and there is a high probability of losing money. Additionally, the fact that DHI has invested in bankrupt companies raises questions about the due diligence process the government undertook before making its investment decisions.

Impact on Bhutan’s Economy

The impact of DHI’s cryptocurrency investments on Bhutan’s economy is uncertain. Cryptocurrencies are still a nascent asset class, and their impact on the traditional financial system is yet to be fully understood. However, if handled wisely, it could potentially benefit Bhutan’s economy by offering new investment opportunities and stimulating growth.

Conclusion

Bhutan’s sovereign wealth fund, Druk Holdings & Investments, has invested tens of millions of dollars in Bitcoin, Ethereum, and other cryptocurrencies. While the official reasons for this investment are yet to be disclosed, some possible motivations include the need for alternative sources of revenue due to the pandemic, greater financial independence from India, and Bhutan’s aspiration to become a digital society. This investment, however, is not without risks, and there are potential consequences of investing heavily in a volatile and unpredictable market like cryptocurrencies. Furthermore, DHI’s investment in two bankrupt cryptocurrency lenders raises questions about its due diligence process. It remains to be seen whether Bhutan’s investment in cryptocurrencies will help the country achieve its economic goals or cause more problems.

FAQs

Q1. Is investing in cryptocurrencies legal in Bhutan?

A1. Bhutan’s government has not issued any specific regulations surrounding cryptocurrencies, making their legality unclear. However, there has been no reported ban on cryptocurrency activities within the country.

Q2. How much did DHI invest in cryptocurrencies?

A2. According to court documents, DHI has invested tens of millions of dollars in Bitcoin, Ethereum, and other digital assets.

Q3. What are the risks of investing in cryptocurrencies?

A3. There are several risks associated with investing in cryptocurrencies, including high volatility, potential for fraud and scams, and lack of government regulation.

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