The Himalayan kingdom has been quietly investing millions of dollars in bitcoin and other cryptocurrencies. His investments, which have never been publicly disclosed, were revealed in the bankruptcy filings of lenders BlockFi and Celsius.
By lain martin and Sarah EmersonForbes Staff
TOAmong the world's most isolated nations, Bhutan is known for its panoramic views, mountaintop monasteries, and a gross national happiness index that prioritizes well-being over economic growth. With an economy based largely on agriculture and forestry, and an infrastructure that began supporting cell phones only two decades ago (traffic lights are still on the horizon), it's hardly a place one would associate with the rise and fall. of cryptocurrencies. And yet, over the past year, "the happiest country in the world" has quietly invested millions of dollars in bitcoin, ether and other digital assets.
According to court documents reviewed by ForbesBhutan's $2.9 billion sovereign investment arm was a client of bankrupt crypto lenders BlockFi and Celsius, which it has never publicly disclosed.
Named after Bhutan's national symbol, the mythological thunder dragon, Druk Holding & Investments manages a portfolio of local assets: a local cheese factory, several hydroelectric power stations and Royal Bhutan Airlines, which has a total of five aircraft. When Druk was established in 2007 through a royal letter of King Jigme Khesar Namgyel Wangchuck, was to safeguard the country's wealth for "the long-term benefit of its shareholders, the people of Bhutan." Druk employees, partners and the the company itself it has been described as a sovereign wealth fund, although it operates more like a state-owned company. Today he supervises 21 national companies.
But since at least 2022, Druk has also cultivated a secretive crypto wallet. He inadvertently exposed himself amid the fallout from last year's cryptocurrency, which bankrupted numerous companies, including FTX and another big lender, Traveler. It is not clear if the Druk properties are linked to recent modernization initiatives in Bhutan, such as a biometric digital identity platform whose first user he was the 7 year old crown prince. But his disclosure raises questions about the reclusive nation's relationship with the turbulent crypto-economy.
In the three months shown in the Celsius presentation, Druk withdrew more than $65 million and deposited nearly $18 million in digital assets.
Last month, lawyers for FiBlockyou requested bankruptcy in November, just days after FTX, filed a complaint with Druk in Thimphu, the capital of Bhutan and home of his royal family. BlockFi is accusing the fund of defaulting on a $30 million loan. The claim noted that in February 2022, Druk agreed to borrow a $30 million coin, a stablecoin pegged 1:1 to the US dollar. However, BlockFi alleged that Druk "failed and refused" to repay the loan in full, even after the lender liquidated a collateral for 1,888 bitcoins (worth $76.5 million at the time of the loan). , leaving an unpaid balance of $820,000.
โWe have no comment as the issue with BlockFi has been resolved. We cannot comment due to confidentiality," Druk CEO Ujjwal Deep Dahal said. Forbes in an email. Dahal did not address a list of questions, such as why Druk needed 30 million USDC, whether "paid off" means the loan was repaid, and how the cryptocurrency was acquired from him.
BlockFi's lawyers did not respond to repeated requests for comment, and the loan agreement with Druk remains sealed. For now, Druk appears to have been the sole target of his attempts to recover outstanding assets.
Months earlier, Druk was also introduced as an institutional client of Celsius, one of the world's largest cryptocurrency lenders who applied for Chapter 11 in July, blaming bad investments and market crashes. In October, Celsius released a document containing more than 14,000 pages of user data including account names, addresses, and transactions. These records showed that Druk Holding & Investments, as well as an account called "Press Projects Fundโ, conducted dozens of operations between April and June 2022, depositing, withdrawing and borrowing bitcoin, ether, tether and a handful of other cryptocurrencies. In the three months shown in the Celsius presentation, Druk withdrew more than $65 million and deposited nearly $18 million in digital assets.
Druk declined to comment on where these funds originated and how they were used. As Celsius lawyers have said signaled his intent to seek "recoveries" of deposits made within 90 days of your bankruptcy, it is possible that Druk's holdings could trigger further legal action.
If it is indeed a sovereign wealth fund, it would appear to be the first to directly own cryptocurrency.
Druk's investment of tens of millions of dollars in cryptocurrency would mark an odd move for a holding company aimed at promoting domestic companies. If it is indeed a sovereign wealth fund, it would appear to be the first to directly own cryptocurrency.
Wealth managers have speculated for several years that government-backed funds are starting to buy cryptocurrencies. For now, the only known links arise when these funds buy stakes in companies that hold crypto, says Duncan Bonfield, executive director of the International Forum of Sovereign Wealth Funds. For example, the Norwegian Government Pension Fund, the world's largest sovereign wealth fund, is a shareholder in business intelligence firm MicroStrategy, whose huge bitcoin holdings meant the fund incidental property 600 bitcoin as of 2020. Singapore's $403 billion Temasek fund has also been widely theorized to have had crypto, but denied the claim last year.
โWe have not seen any real interest in cryptocurrency as an asset class, and we do not believe any of our members have an allocation for cryptocurrency in their portfolios,โ Bonfield said. Forbes.
Caught between China, Nepal and India, the kingdom of Bhutan only opened its borders to foreigners in 1974 in an attempt to grow its economy through high-end tourism. Before Bhutan temporarily banned foreign visitors as a result of the pandemic, tourism had become one of its most lucrative exports, along with hydropower and agriculture. And a series of open partnerships suggest the nation saw similar benefits in crypto as well.
In 2020, busy organized a panel of blockchain advocates "to enhance awareness among our local stakeholders" and "potentially engage the industry through education and investment for years to come." A year later, the cryptocurrency exchange Ripple Announced was working with Bhutan to pilot a "central bank digital currency" based on its proprietary XRP ledger. (Ripple has been engaged in a lawsuit with the US Securities and Exchange Commission since 2020 for allegedly selling unregistered securities. The company saying intends to fight what he called an "attack" on cryptocurrencies). Soon after, Bhutan began experimenting with nft art and emission carbon credits in the block chain.
Neither Druk nor Ripple responded to questions about their digital currency pilot program and whether it is ongoing. InfraBlocks Technologies, a Singaporean technology company that was contracted to help Bhutan develop its tokenized carbon credit platform, said the project would have a commercial launch later this year. โWe have completed the pilot and created a market for trading small hydro projects,โ says Shubhomoy Ray, co-founder and president of Infrablocks.
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