The Pakistani government has announced the allocation of 2,000 megawatts of electricity for Bitcoin mining and artificial intelligence data centers. Although cryptocurrency does not yet have a legal status or framework in the country, the announcement is being considered a major first step in this direction.
According to the Ministry of Finance, the aim of this initiative is to convert surplus or excess electricity into a profitable asset, create employment opportunities based on modern technology, bring billions of dollars of foreign direct investment into the country and earn significant foreign exchange for the national exchequer.
According to the statement, the electricity that was being wasted or not fully utilized in Pakistan can now be used in Bitcoin mining and AI data centers. ‘These centers consume continuous and large amounts of electricity, which will enable the effective use of excess electricity and will give the government an opportunity to earn foreign exchange.’
Keep in mind that crypto mining, especially Bitcoin mining, is a digital process in which powerful computers create new cryptocurrencies and verify transactions through digital calculations. This requires a large amount of electricity.
To create a new block every ten minutes, computers have to work at high speed, and as the value of Bitcoin increases, the consumption of miners and electricity also increases. The aim is to make the network secure and robust so that any type of attack becomes extremely difficult.
Bitcoin mining uses as much energy as a small country like Poland. In 2021, researchers at the University of Cambridge told the BBC that Bitcoin mining uses about 121.36 terawatt hours of energy annually, which is equivalent to the annual electricity consumption of Argentina.
According to the latest data from Cambridge, the Bitcoin network is currently consuming about 21.35 gigawatts of electricity, which amounts to 187.13 terawatt hours per year. That’s more than the annual energy consumption of countries like Argentina, the Netherlands, and the United Arab Emirates.
In this article, we spoke to experts in the crypto and energy sectors to find out how feasible the government’s plan is, what obstacles it might face in its implementation, and what potential benefits it could bring.
What is Pakistan's plan to convert surplus electricity into dollars?
Federal Finance Minister Senator Muhammad Aurangzeb has said that the government’s decision to provide 2,000 megawatts of additional electricity for Bitcoin mining and AI data centers is an important step towards Pakistan’s digital development, which will enable the surplus electricity to be converted into technology, investment and foreign exchange.
A statement issued by the Ministry of Finance said that this project is being launched under the leadership of the Pakistan Crypto Council (PCC), a government agency under the Ministry of Finance.
The statement said that Pakistan has a unique geographical and economic location that can become a digital bridge between Asia, Europe and the Middle East. This is why many global companies are interested in investing in crypto mining and data centers here.
According to the statement, the wasted electricity will now be used in Bitcoin mining and AI data centers and will give the government an opportunity to earn foreign exchange.
Pakistan Crypto Council CEO Bilal Bin Saqib says that if the sector is promoted with legislation, transparency and global cooperation, Pakistan can become a global hub for crypto and AI. According to him, this step not only opens the doors to investment but also gives the government an opportunity to earn revenue in US dollars. In the future, the government can store Bitcoin in a 'national wallet' and accumulate valuable digital assets, which could prove to be a major economic transformation.
According to the ministry, the cost of electricity in Pakistan is lower than in countries like India and Singapore, where expensive electricity and land shortages are obstacles to the development of this sector. Pakistan has resources like cheap electricity, available land and manpower, which provide it with a rare opportunity to move forward in this sector.
It has also been claimed that recently the world’s largest internet submarine cable (Africa to Cable Project) has reached Pakistan, which will improve internet speed, data security and connectivity, and these factors are fundamental for data centers.
According to the ministry, Pakistan’s population of over 250 million and over 40 million crypto users can make it a major digital power in the region. Local AI data centers will not only increase data sovereignty but also create thousands of new jobs in IT, engineering and data sciences.
It has also been claimed that the government plans to introduce renewable energy-powered data centers, global partnerships, fintech hubs, and other digital projects in the next phase, as well as provide various incentives.
What are the challenges and how feasible is this project?
Economist Ammar Habib Khan says that the biggest challenge for crypto mining is how to provide cheap electricity, that is, what is the price at which this project is financially viable.
Speaking to the BBC, he said that crypto mining is profitable only when the price of electricity is 4-5 cents per unit, while the surplus electricity in Pakistan is mostly generated from imported coal in the southern regions, the fuel cost of which is 5 to 6 cents per unit. “When you add the additional costs of transmission and distribution, the total cost comes to about 7 to 8 cents per unit, which is not profitable for crypto mining.”
According to Ammar, the second major challenge is that if the government provides electricity at subsidized rates for crypto projects, then the same rates will have to be paid to other industries as well, because discrimination or subsidies against any sector are not allowed under the IMF program.
Ammar Habib Khan says that it should be a principled economic policy for any sector, not just crypto, that if there is excess electricity available, it should be used in industries that can increase exports and create employment opportunities.
He also believes that it is necessary to get IMF approval before implementing this project.
Even today, load shedding in Pakistan increases during hot summer days, even though the country has become self-sufficient in electricity generation and the total generation is more than the domestic demand. Despite this, power outages and high tariffs remain two major problems for ordinary consumers.
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