Bhutan, one of the world’s most isolated nations, is renowned for its breathtaking landscapes, monasteries atop mountains, and a Gross National Happiness Index that values well-being over economic expansion. Its economy relies mostly on agriculture and forestry, and its technological infrastructure only began accommodating mobile phones in the last 20 years while traffic signals are still a future goal. Therefore, it seems unlikely that Bhutan would have any involvement in the crypto highs and lows. However, in the past year, “the happiest country in the world” has been discreetly investing millions of dollars in Bitcoin, ether, and other digital assets.

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Sandwiched Between India, China, and Nepal, Bhutan Holds a Secret Crypto Portfolio 

A renowned American business magazine has scrutinized court papers revealing that Bhutan’s sovereign investment fund, worth $2.9 billion, was a patron of BlockFi and Celsius, both of which are bankrupt cryptocurrency lenders. Bhutan has kept this information confidential until now.

Druk Holding & Investments, (named after Bhutan’s national symbol – the thunder dragon), manages a portfolio of local assets including a cheesemaker, hydropower plants, and Royal Bhutan Airlines, which has five planes. Established in 2007 by King Jigme Khesar Namgyel Wangchuck to protect Bhutan’s wealth for the long-term benefit of its people, Druk oversees 21 domestic firms and operates more like a state-owned enterprise despite being referred to as a sovereign wealth fund.

Druk has been discreetly building a crypto portfolio since at least 2022, but it was unintentionally revealed during the fallout from the crypto crisis that caused companies such as FTX and Voyager to go bankrupt. It is uncertain whether Druk’s investments in cryptocurrency are linked to Bhutan’s recent modernization projects, including a biometric digital identity platform used by the crown prince at the age of 7. Nonetheless, the disclosure of Druk’s involvement in cryptocurrency has sparked inquiries into the secluded nation’s association with the volatile crypto industry.

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Druk Withdrew Over $65 Million and Deposited Nearly $18 Million in Cryptocurrency

BlockFi has accused Druk of defaulting on a $30 million loan in a complaint filed in Bhutan’s capital, Thimphu. The lawsuit claims that Druk borrowed 30 million USD Coin in February 2022 but failed to repay the loan fully, despite BlockFi liquidating 1,888 bitcoin as collateral, worth $76.5 million at the time of the loan. As a result, Druk still owes $820,000 to the lender.

Druk’s CEO, Ujjwal Deep Dahal, declined to comment on the matter with BlockFi, citing confidentiality as the issue has been resolved. He did not respond to questions regarding Druk’s need for 30 million USDC, how their crypto holdings were obtained, or whether the loan was paid back. BlockFi’s lawyers did not provide any comment on the matter and the loan agreement with Druk remains confidential. So far, it appears that Druk is the only target of BlockFi’s efforts to recover unpaid assets.

Druk was also revealed as a customer of Celsius, which filed for Chapter 11 in July, and had its user data leaked in October. The data showed that Druk and the “Druk Project Fund” made multiple trades involving bitcoin, ether, tether, and other cryptocurrencies between April and June 2022, withdrawing over $65 million and depositing nearly $18 million in digital assets. Druk did not disclose the origin or use of its crypto funds and declined to comment. As Celsius plans to seek “clawbacks” of deposits made within 90 days of its bankruptcy, Druk’s holdings could potentially lead to additional legal action.

Is Bhutan’s Druk, the First Sovereign Wealth Fund to Own Cryptocurrency?

Druk’s sizable investment in cryptocurrency raises questions about its role as a holding company focused on promoting domestic ventures. Moreover, if it is a sovereign wealth fund, it could be the first to directly own crypto.

According to Duncan Bonfield, CEO of the International Forum of Sovereign Wealth Funds, over the years, wealth managers have been speculating that government-backed funds are starting to invest in cryptocurrency. However, at present, the only known links between these funds and crypto are when they purchase stakes in companies that own it. 

For example, the Worlds largest sovereign fund, the Norwegian Government Pension Fund is a shareowner of MicroStrategy (a business intelligence firm). The huge Bitcoin holdings show that the fund owned around six hundred bitcoins as of 2020. Similarly, the Singapore-based Temasek fund that owned $403 billion was rumored to hold cryptocurrencies. However, last year, the fund clearly denied the claim. 

“The CEO of the International Forum of Sovereign Wealth Funds, Duncan Bonfiled stated that they have observed no real interest in cryptocurrencies as an asset and that they do not believe that any of their members have assigned cryptocurrencies in their portfolio.”

Does Bhutan Have a Potential Future in Crypto Industry?

Sharing borders on three sides with China, India, and Nepal, in 1974, the country of Bhutan opened its borders to foreigners to grow its economy with luxury tourism. Before banning tourists during the covid-19 pandemic, along with agriculture, and hydropower, tourism became one of the most profitable sectors. Moreover, a series of open-ended partnerships suggested that the country was also reaping similar benefits from the crypto industry. 

In 2020, Druk Holdings & Investments organized a discussion panel with blockchain advocates to increase knowledge among stakeholders and help to increase the industry via investment and education for the coming years. In 2021, Ripple (a renowned crypto exchange platform) announced that it was working as a wingman to help launch the ‘Central Bank Digital Currency’ of Bhutan, which was built on its exclusive XRP ledger. 

Ripple, however, is undergoing a lawsuit with the Exchange Commission, and U.S. Securities since 2020 for selling off unregistered securities. The company further claimed that they are planning to fight the attack on the crypto industry. However, within a short period, Bhutan started experimenting with NFT art and issuing carbon credits on blockchain technology. 

The Bottom Line

Both Druk and Ripple chose not to respond to their digital currency pilot project or if there are any other ongoing projects. A Singapore-based tech company, InfraBlocks Technologies was hired by Bhutan to develop a tokenized carbon credit platform which would be launched later this year.

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