Gambling to develop: A small, landlocked economy takes the plunge

Small, remote, landlocked economies must perforce try harder. To mobilize resources and sustain desired growth rates, these economies must be innovative and take advantage of new technologies and trends in global demand, with due caution.

Few countries are smaller and more isolated than Bhutan. This “island of happiness” with a population of 797,000 is nestled in the Eastern Himalayas. Bhutan’s mountainous terrain imposes significant economic constraints: Only 8% of the land area is arable, while transport, logistics, and internet costs are high. Fifty percent of the population is rural, 10.1% are poverty-stricken (below $8.3/day PPP; 2022), and 80% of the workforce is engaged in informal activities. Per capita GDP of about $4,000 and the absence of scale economies inhibit industrial activity.

Bhutan has averaged a growth rate of 3.5% per annum over the past decade (2015-2024), driven by the construction of “run of the river” dams, hydropower export, minerals such as ferro-silicates, limestone, and gypsum, wood products, and tourism services. Growth during the past five years has been relatively jobless, with youth unemployment rising to 17.7% in 2024. This has exacerbated outward migration, especially among young graduates and workers in the health, education, and hospitality sectors. By 2025, 66,000 Bhutanese were living abroad. This exodus is forcing the tourism industry to look abroad for staff to fill the increasing number of vacancies.

To stem the outflow, which is denuding the stock of human capital, Bhutan is attempting to more than double its growth rate, pushing it into the double-digit range, to multiply the number of well-paid jobs and to become a high-income economy by 2034. Bhutan’s 10X National Economic Vision is targeting a tenfold increase in national product by 2050 from $3.1 billion in 2024. GDP growth is now the primary objective, displacing Gross National Happiness, Bhutan’s signature policy lodestone since the late 1970s. To accelerate growth, the approximately $1.5 billion 2025-26 budget has increased the capital outlay by 59%.

To achieve this ambitious target, Bhutan is not only doubling down on traditional drivers but also leveraging the potential of cryptocurrencies and an innovative urban scheme. Increasing hydropower generation, currently accounting for about 14% of GDP and a quarter of revenues, is one option that is being actively pursued. Installed capacity in 2024 was 2,500MW. The theoretical maximum is over 30,000MW. To ramp up operational capacity, Bhutan must raise capital mainly from India, which is the principal consumer of power exports, and overcome delays and cost overruns that have affected ongoing projects. The window of opportunity is narrowing because climate change could further reduce river flows in the autumn and winter seasons. In fact, the seasonality of river flows is such that Bhutan purchases power from India in the winter. Furthermore, India’s steeply rising power-generating capacity could also lead to a tapering of demand for hydropower.

Bhutan is also betting on the tourist industry (10% of GDP) that directly employs 30,000 workers. For Bhutan’s high-value, low-volume approach to deliver the sought-after revenues, it needs to reach or even exceed the 315,000 arrivals in 2019. In 2024, there were 145,000 arrivals, the majority from India. Cross-border visitors spend less and stay for a shorter period. Bhutan can attract an increasing number of affluent, long-stay tourists from elsewhere in the Asian region and Europe by tapping into the rising demand for wellness and ecotourism. This is where the Gelephu Mindfulness City (GMC), an urban special administrative region (SAR) launched in December 2023, can play a decisive role, and the use of cryptocurrencies could facilitate transactions by visitors.

Under the most favorable scenario, these two sources of growth, abetted by an expansion of the digital economy, may push growth into the high single-digit range. A surge of investment in hydropower, the commissioning of new projects together, with a larger influx of tourists, has done so episodically in the past, and the commissioning of a new project buttressed the more than 5% growth achieved in 2025.

But these drivers cannot deliver 10X performance. Hence, to fuel higher growth, the government is leveraging two less orthodox initiatives: (i) the mining of cryptocurrencies, such as Bitcoin (BTC) and Ether (ETH); and (ii) the creation of the autonomous GMC bordering India’s Assam Province. This development, which could eventually cover 2,500 square kilometers, would be three times the size of Singapore, which is 734 square kilometers, and serve as a new urban growth engine.

In 2019, Bhutan’s publicly owned Druk Holdings (DHI) began investing in Bitmain crypto hardware and set up four mining farms on the site of an abandoned education city, near Dochula Pass, and near the Trongsa and Dagana townships. By 2022, the outlay on chips exceeded $200 million, and additional spending on IT and transmission equipment pushed it to an estimated $539 million by mid 2023. Mining, which commenced in 2020, is aided by abundant hydropower. The mining facilities are generating substantial revenue for DHI, which in 2023 entered a partnership with Bitdeer to develop 600MW of mining capacity. Revenue from mining has permitted the government to raise the salaries of civil servants and stem outmigration. By one estimate, from 2021 onward, Bhutan sent $578.5 million worth of BTC to various exchanges. In addition, it traded stablecoins and ETH valued at $250 million in exchange for other stablecoins. At the end of 2025, Bhutan was still holding BTC valued at $1.3 billion (the fifth largest holding) and was depositing about $90 million worth of BTC each month—equal to almost $1 billion on an annual basis if sustained, about a third of 2025 GDP.

The success of the mining operation has led the government to issue, via Gelephu City, a sovereign-backed digital token (TER) linked to its gold reserves. DK Bank is the custodian of the gold reserves backing TER. Solana is the blockchain platform on which TER is issued. This ensures ease of portability, trading, and transactions for investors and tourists alike. The introduction of an Ethereum-enabled digital identity system lends additional support to crypto trading.

The Bitcoin holdings are also supporting the development of GMC. Bhutan hopes that the SAR will become a developmental hub pulling in expertise and investment from around the world to establish sustainable businesses promoting green technologies, the infrastructure for wellness tourism, and residential zones. The key draws are Bhutan’s distinctive cultural heritage, high-end facilities, a biodiverse park, a wildlife sanctuary, and convenient access via an international airport. Moreover, Gelephu (GMC) has an autonomous administrative system modeled on Singapore and Abu Dhabi with its own laws, and a defined boundary separating it from the rest of Bhutan.

Creating the Mindfulness City faces substantial hurdles and is proceeding slowly with a ten-year time horizon. Raising the capital needed is one challenge. Environmental constraints, including instability of the soil, landslides, and seismic vulnerability, constitute a second. A third obstacle is the ongoing loss of the workforce. However, progress has begun with the establishment of an international airport, and Drukair has initiated biweekly flights to Kolkata.

Could this be a winning combination for Bhutan? The development package includes hydropower, high-value, low-impact tourism, and a special administrative region modeled after Singapore, situated in the Himalayan foothill setting. The initiative is underpinned by the revenue generated from crypto-mining operations. Bhutan is gambling on several uncertain assumptions. The first is the continuation of the cryptocurrency boom—a risky bet, as shown by El Salvador’s experience with cryptocurrency, its efforts to build a Bitcoin City, and the use of crypto to move capital offshore. It is also betting on SAR attracting the wealthy from Asia and beyond to flock to GMC—parking their assets, conducting business, making it their second or third home while enjoying the cultural and wellness amenities on offer. A third wager is that a large volume of investment will flow into hydropower and high-end hospitality infrastructure. Finally, Bhutan is counting on the stability of river flow as climate change thins the Himalayan glaciers.

This is an audacious gamble, and the stakes are high. If Bhutan succeeds, through effective policy design and managerial skill, it will demonstrate to other developing countries the value of experimenting with innovative and unorthodox strategies in these profoundly uncertain times.