Ethiopia is venturing into plans to sale power  to over two dozen data mining companies. This move has ignited a discussion between key industry players and keen observers on the potential benefits and drawbacks associated with this nascent industry.

Fueling crypto with a million-dollar start is the Ethiopian Electric Power (EEP). It has signed deals with 18 companies, four of which are already operational. These companies are heavy consumers of electricity, demanding significant amounts ranging from 10MW to 100MW to power their crypto-mining operations. The initial revenue collected in foreign currency has already surpassed two million dollars within a mere two months.

Ethiopia's emerging legislative framework recognises crypto-mining as a form of data mining which involves solving complex mathematical problems using powerful computers. This computation known as hashing, is integral to generating new cryptocurrencies.

The past two years have witnessed a surge in crypto-mining companies setting up shop in the country. This coincides with a relaxation of regulatory restrictions and a modest increase in the country's electricity generation capacity. While trading cryptocurrency remains banned, reflecting a cautious approach towards the volatile market, authorities are actively developing regulations for mining it.

The Information Network Security Administration (INSA) spearheads this regulatory shift. In 2022, INSA offered a brief 10-day window to register entities involved in crypto services, such as mining or transfer. This move signalled a tentative openness to the industry, attracting around 21 companies to Ethiopia. Solidifying this shift, a directive was finalised this year aimed at regulatory and technological standards for crypto-mining operations.

Moges Mekonen, EEP's communications director, acknowledges the evolving landscape. He emphasises that additional infrastructure development is not necessary with most companies located on the outskirts of Addis Abeba, simply connecting to the existing nationwide grid. However, he clarifies that EEP's role is merely to connect potential partners with high-energy substations, as long as payment commitments are fulfilled.

"We don't regulate the specific type of data mined," he said.

EEP and Ethiopian Electric Utility (EEU) were established as separate entities 13 years ago with distinct roles. The Utility is responsible for managing electricity distribution and purchasing bulk power for resale. A senior official from the EEU claims to learn about the power sale agreements with crypto miners through media outlets, with no prior engagement between the two state-owned enterprises.

For companies, setting up business in Ethiopia presents a golden opportunity. The country boasts significantly lower electricity prices (0.6 cents per kWh) compared to Europe and North America hovering around (34 cents per kWh). However, it is not all smooth sailing. Three companies have already received warnings for failing to meet essential prerequisites despite signed agreements.

Many countries initially welcome crypto miners, lured by the promise of investment. However, the high energy demands of these operations can quickly turn into a nightmare. Kazakhstan serves as a cautionary tale. Once a haven for miners, it embraced them in early 2017, only to face a harsh reality of miners' insatiable appetite for power, consuming up to seven percent of the national output, resulting in rolling blackouts for ordinary citizens. This ultimately led Kazakhstan to take swift action by effectively cutting off power to miners.

Similarly, China cracked down on Bitcoin, the most valuable cryptocurrency, mining in 2021 due to concerns about grid stability and its environmental impact. Some landed in Ethiopia.

Following their footsteps, Ethiopia seems to be taking a cautious approach. Aschalew Tadesse, head of the investment promotion directorate at the Ethiopian Investment Commission (EIC), indicated that new licenses for cryptocurrency mining have been temporarily suspended due to the lack of clearly defined legislative footing.