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Stablecoin Giant Tether Experiments with Renewable Bitcoin Mining in El Salvador
Tether, the predominate stablecoin issuer, is venturing into renewable Bitcoin mining. The company recently poured money into local, sustainable Bitcoin mining projects in El Salvador and Uruguay to “promote sustainable Bitcoin mining.”
Tether, which recently announced plans to regularly invest in Bitcoin, appears to want to keep it straight and narrow after years of fending off concern over just about every aspect of its existence.
The proactive move by the company should pacify critics who have railed against Bitcoin’s energy-intensive mining industry.
Tether Backs New Operation in El Salvador
This June, Tether announced it had participated in a $1 billion first round of investment in Volcano Energy — a new renewable energy generation park based in the Metapán region of El Salvador.
The stablecoin firm said it would inject capital and bring its expertise in “energy, hardware, and communications” to the initiative. Volcano Energy will generate 241 MW of power by combining 169 MW of solar and 72 MW of wind energy.
The combined power will initially generate energy exceeding 1.3 EH/s (1 EH/s equals one quintillion hashes per second).
Tether is one of the investors in the project that will own 27%, with the El Salvador government securing “a preferred participation of 23% of revenues,” while the remaining 50% will be plowed back into the operation to boost the ability to produce more energy and advance Bitcoin mining.
With the move, Tether aims to “play a key role in paving the way for one of the world’s largest Bitcoin Mining Farms.” Tether’s Chief Technology Officer Paolo Ardoino said the move pushes forward Tether’s diversification of its “strategic ecosystem.”
Bitcoin Country
Volcano Energy is the latest mega Bitcoin project by El Salvador after its landmark 2021 decision to make the pioneer cryptocurrency legal tender. Now, the Central African state hopes to position itself “as a prominent global player in the Bitcoin mining industry.”
Per its Twitter post, Volcano Energy will also promote “energy competitiveness, diversification, and geographic expansion” (a view echoed by Tether) while “establishing a global Bitcoin standard.”
The company also said Metapán’s volcanoes would play a key role in the country’s global leadership in Bitcoin mining, although it’s not clear how exactly that would happen.
Former financial journalist and Bitcoin prominent advocate Max Keiser, whom the company has tapped as chairman, echoed this sentiment, declaring, “El Salvador has the volcanoes…and now the expertise and support of Tether to be a Bitcoin mining powerhouse.” He further proclaimed that ”Bitcoin Country will now also be known as Bitcoin mining country.”
Tether's Renewable Bitcoin Mining Uruguay Debut
Tether first forayed into the renewable Bitcoin mining space in May when it joined forces with a local company in Uruguay to launch a mining operation.
The stablecoin firm said it was “investing resources into energy production and the launch of sustainable Bitcoin mining operations” in the country. Tether also said it was actively looking to recruit “experts in the energy sector” to support the objective.
At the time, Ardoino said the company was “harnessing the power of Bitcoin and Uruguay’s renewable energy capabilities” to pave the way for “sustainable and responsible Bitcoin mining.”
Uruguay is a top producer of renewable energy, with more than 98% of its electricity coming from renewable sources, primarily wind and hydropower, per the International Trade Administration. In 2005, the South American nation embarked on an ambitious transition from petroleum-based energy production to renewable sources.
According to Tether, Uruguay provides favorable conditions for renewable energy production and “the perfect platform” to roll out Bitcoin mining operations in the country.
Changing Tack
Tether is a leading stablecoin firm behind Tether (USDT) — one of the oldest stablecoins and the most successful. The Hong Kong-based company makes money via transaction fees, issuance and redemption fees, lending to other institutions, and so on.
It disclosed a surprise net profit of $1.48 billion in the first quarter of this year — a milestone that brought its total surplus reserves to $2.44 billion.
In the attestation report, Tether said it had phased out commercial paper holdings and replaced them with US Treasury bills. It also revealed that its direct ownership of US Treasuries peaked at over $53 billion — representing more than 64% of its total reserves.
Those commercial paper holdings have been a thorn in Tether’s side, with the crypto community raising concerns about the companies behind them and where they’re located. Tether has even been slapped with a $41 million fine for “making misleading statements” about the state of USDT’s reserves, among other legal issues.
Perhaps these realities have made Tether pivot towards US Treasuries and, more recently, Bitcoin, after phasing off the commercial paper holdings. The company has announced its intention to dedicate 15% of its realized net profits to acquiring Bitcoin going forward.
Why Now?
Tether’s entry into environmentally conscious Bitcoin mining could be a strategic response to years of bad press and regulatory scrutiny.
By buying Bitcoin, the company wants to tap into the positive economic benefits of Bitcoin and sidestep any negative publicity or regulatory hurdles it would face otherwise. It probably also wants to avoid going against the grain, seeing as the Bitcoin mining industry is slowly transitioning into renewable energy.
As it notes in the press release, “Currently, more than 52% of Bitcoin mining is being done sustainably,” a percentage likely to increase in the coming years “through important investments” such as Volcano Energy. The last thing it wants is not to be on the right side of this shift.
Final Thoughts: Win-Win for BTC, Tether
Tether is positioning itself as a trailblazer in promoting responsible Bitcoin mining.
For an industry usually pummeled for consuming a lot of energy, it’s nice to see an insider investing big bucks for the greater good. This, combined with Tether’s strategic accumulation of Bitcoin might prove a winning strategy for the company.
