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Laos has cleared cryptocurrency mining and trading, as part of a policy shift from the indebted Southeast Asian nation that positions it to profit from the crackdown on mining of digital currencies in China.
Analysts said the move was a logical step for the landlocked, Communist-led $ 7million country, which produces surplus hydroelectric power, but some have warned that criminal gangs may seek to profit from the trade.
The crypto push marks an about-face after the country’s central bank last month warned banks, businesses and individuals against the use of cryptocurrencies.
The prime minister’s office said this week that six companies, including construction groups and a bank, had been authorized to start mining and trading cryptocurrencies such as bitcoin, ethereum and litecoin.
Government ministries will now work with the Bank of Laos and Electricité du Laos, the national electricity company, to regulate the industry, according to a Laotian Times report. The results of the research and the consultation are expected to be discussed at a government meeting later this month.
The switch to crypto comes as Laos faces a loss in tourism income caused by the Covid-19 pandemic, which has also reduced demand for hydropower, a fundamental industry in a country that has borrowed heavily to build dams on the Mekong and its tributaries.
“Whichever way you cut it, Laos has an abundance of power generating capacity and it doesn’t have a lot of internal demand for that power,” said David Tuck, a Bangkok-based partner with Lyriant. Advisory, a business intelligence consulting firm. “And one of the key requirements for crypto mining is massive amounts of energy.”
Using hydropower to mine crypto could allow Laos to portray the industry as “carbon neutral,” at a time when cryptocurrency’s carbon footprint is the subject of increasing international criticism, added Tuck.
Laos’ mountainous topography and distance to seaports have long delayed its development, prompting authorities to support industries ranging from hydropower to casinos and a rail line from Kunming, China to Vientiane, which is expected to open its doors. doors in December. His government has spoken of promoting mining projects as a source of income as it seeks to pay off the country’s nearly $ 14 billion debt.
However, northwest Laos is part of the Golden Triangle, the border region between Myanmar and Thailand known for the production and trafficking of narcotics, which has increased during the pandemic.
The government of Laos recently pledged to step up efforts to combat money laundering, after coming under close scrutiny by the Financial Action Task Force, the United States and the United Nations Office on Drugs. and crime.
“You should always be concerned when countries with poor regulatory records start to get involved in things like cryptocurrency,” said Zachary Abuza, professor at National War College in Washington, who specializes in South Asia. -East. “To say that the Laotian financial system is immature would be a stark understatement, and we have to be concerned if they rush into this.”
In 2018, the US Treasury imposed sanctions on what it called a transnational criminal organization run largely from a casino in Laos’ Golden Triangle Special Economic Zone, operated by the Kings Group. Novels, based in Hong Kong.
Washington said the network spanned across Southeast Asia and was involved in “horrific illicit activities,” including human trafficking, child prostitution, and drug and cash trafficking. wild.
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