Kingdom of Bhutan secretly invested millions in crypto, report says

As part of the bankruptcy proceedings of BlockFi and Celsius, it has come out that the Kingdom of Bhutan has secretly invested tens of millions of US dollars in cryptocurrencies. This is reported by Forbes.

The Kingdom of Bhutan is known as a tourist destination, with its picturesque location in the Himalayas and Buddhism as the state religion shaping its character. Officially, Bhutan places quality of life above economic growth and thus always appears high up in global rankings when “the happiest people in the world” are sought. But the business magazine Forbes now reports that Bhutan’s sovereign wealth fund has been handling tens of millions of U.S. dollars in Bitcoin, Ethereum and other cryptocurrencies behind the scenes. The report is based on court documents from the bankruptcy proceedings of US crypto firms BlockFi and Celsius.

According to the report, Druk Holding & Investments, as Bhutan’s sovereign wealth fund, borrowed $30 million from BlockFi in the form of the stablecoin USDC in February 2022, but failed to repay the loan on time. As a result, 1,888 Bitcoin (BTC), which served as collateral for the loan, had been activated for the lenders. Controversy arose over nonetheless a funding gap of $820,000, according to Forbes. But this has since been quietly and amicably settled, it said. Why Druk Holding & Investments had borrowed USDC and from where one had Bitcoin, the state fund did not want to answer.

Sovereign wealth fund of Bhutan customer at BlockFi and Celsius

But it became clear during research: Bhutan was not only a customer of BlockFi through Druk Holding & Investments, but also of Celsius. There, according to Forbes documents, the sovereign wealth fund was active from April to June 2022, withdrawing $65 million in cryptocurrencies and depositing $18 million. How exactly and why Bhutan invested such amounts in volatile cryptocurrencies and possibly drove a risky strategy, Druk Holding & Investments did not comment.

The fact that a sovereign wealth fund is involved in Bitcoin and Co. is very unusual, writes the paper. Only the Norwegian sovereign wealth fund is known to have invested in MicroStrategy. The U.S. company began shifting cash reserves into Bitcoin in 2020 and has become a way to indirectly invest in BTC. Druk Holding & Investments, however, did not take such a roundabout route, but appeared directly as a client of crypto platforms.

Bhutan is considered open-minded towards the crypto industry. A joint pilot project has been running with Rippe (XRP) since 2021, which is intended to prepare a government-guaranteed digital currency (CBDC). Bhutan is also embracing blockchain solutions for carbon trading. And King Jigme Khesar Namgyel Wangchuck took over the patronage of a nationwide competition in 2022 looking for indigenous NFT art.

Bottom line: Bhutan is operating in the crypto markets – but why secrecy?

Druk Holding & Investments is under royal control and also justifies its silence by saying that its relationship with Celsius has not yet been settled. But one may well ask whether secrecy is appropriate in state investments. Bhutan’s willingness to take risks, on the other hand, is likely to please parts of the crypto scene, which interpret the state’s involvement as an accolade for Bitcoin and Co.

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