El Salvador partnership to build $1bn bitcoin mining farm
Last updated on: 06 June,2023 08:35 am
The project will start with an initial $250 million
SAN SALVADOR (Reuters) - A public-private partnership in El Salvador will pump $1 billion into creating one of the world's largest bitcoin mining farms, the group called Volcano Energy announced on Monday.
The project will start with an initial $250 million, backed by "key Bitcoin industry leaders" in collaboration with renewable energy developers, Volcano Energy said in a statement.
El Salvador's state "Bitcoin Office" retweeted the news on its Twitter. The presidential office did not immediately respond to a request for comment.
Volcano Energy said the funds would go toward an estimated 241 MW power generation park using solar and wind energy in the northwestern municipality of Metapan, which will eventually power the bitcoin mining farm.
Bitcoin mining uses high-power computers hooked up to a global network, sucking up massive amounts of electricity in the process. The energy-intensive practice has come under fire from environmentalists who are concerned that it would exacerbate forest loss and climate change.
The announcement comes two years after Salvadoran President Nayib Bukele declared his intention to make bitcoin legal tender.
A Reuters report found adoption among residents has been shaky, while the International Monetary Fund has cautioned against the embrace due to legal risks, fiscal fragility and the speculative market.
Bukele and his bitcoin backers have said the currency can bring jobs, financial inclusion and foreign investment to the country, one of the poorest in the Western Hemisphere.
The El Salvador government will have "a preferred participation equivalent to 23% of the revenues" in the project, Volcano Energy said, with private investors holding 27%.
The remaining 50% will be reinvested back into infrastructure, the statement said, without clarifying the overall ownership structure.
Tether, a startup operating a cryptocurrency pegged to the U.S. dollar, participated in the initial investment, it confirmed in a separate statement, without specifying the amount contributed. It listed Josue Lopez, who was involved with a $200 million solar energy plant announced last year, as the CEO of Volcano Energy, and Max Keiser, a bitcoin influencer, as its chairman.