The tiny kingdom of Bhutan secretly held millions of dollars in cryptocurrency
The Himalayan kingdom has been quietly dumping millions of dollars in bitcoin and other cryptocurrencies. The investments, which have never been made public, were disclosed in the bankruptcy filings of lenders BlockFi and Celsius.
Of Iain Martin and Sarah EmersonForbes staff
ONEamong the world’s most isolated nations, Bhutan is known for its sweeping vistas, mountaintop monasteries and a gross national happiness index that prioritizes well-being over economic growth. With an economy largely built on agriculture and forestry, and infrastructure that only started supporting mobile phones two decades ago (traffic lights are still on the horizon), it’s hardly a place you’d associate with the crypto boom and bust. And yet over the past year, the “world’s happiest country” has quietly dumped millions of dollars into 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 disclosed.
Named after Bhutan’s national symbol, the mythological thunder dragon, Druk Holding & Investments manages a portfolio of homegrown assets: a local cheese maker, several hydroelectric plants and Royal Bhutan Airlines, which has a total of five aircraft. When Druk was established in 2007 through a royal charter from King Jigme Khesar Namgyel Wangchuck, it was to secure the country’s wealth for the “long-term benefit of its shareholders, the people of Bhutan”. Druk’s employees, partners and the company itself have described it as a sovereign wealth fund, although it operates more like a state-owned enterprise. Today, it supervises 21 domestic companies.
But since at least 2022, Druk has also cultivated a secret crypto portfolio. It was inadvertently revealed amid the fallout from last year’s crypto contagion, which led to the bankruptcy of a number of companies, including FTX and another major lender, Voyager. It is unclear whether Druk’s holdings are linked to recent modernization initiatives in Bhutan, such as a biometric digital identity platform whose first user was the 7-year-old crown prince. But the revelation raises questions about the reclusive nation’s relationship with the turbulent crypto-economy.
In the three months shown in the Celsius archive, Druk withdrew more than $65 million and deposited nearly $18 million in digital assets
Last month, lawyers for BlockFi, which filed for bankruptcy in November just days after FTX, filed a complaint with the Druk in Thimphu, Bhutan’s capital and home to the royal family. BlockFi accuses the fund of defaulting on a $30 million loan. The claim noted that in February 2022, Druk agreed to borrow 30 million USD 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 of 1,888 bitcoin (worth $76.5 million at the time of the loan), leaving an unpaid balance of $820,000.
“We have no comments as the case with BlockFi has been settled. 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 “settled” means the loan was repaid and how the crypto holdings were acquired.
Lawyers for BlockFi did not respond to repeated requests for comment, and the loan agreement with Druk remains under seal. For now, Druk appears to have been the sole target of its efforts to recover outstanding assets.
Months earlier, Druk was also expelled as an institutional client of Celsius, one of the world’s largest crypto lenders that filed for Chapter 11 in July, blaming poor investments and a market downturn. In October, Celsius released a document containing more than 14,000 pages of user data that included account names, addresses and transactions. Those records showed that Druk Holding & Investments, in addition to an account called “Druk Project Fund,” made a series of trades between April and June 2022 — deposits, withdrawals and loans of bitcoin, ether, tether and a handful of other cryptocurrencies. In the three months shown in the Celsius archive, Druk withdrew more than $65 million and invested nearly $18 million in digital assets.
Druk refused to comment on where these funds originated and how they were used. As Celsius’ lawyers have noted their intention to seek “clawback” of deposits made within 90 days of the bankruptcy, it is possible that Druk’s holdings could trigger further legal action.
If it is indeed a sovereign wealth fund, it appears to be the first to own crypto directly
Druk’s investment of tens of millions of dollars in crypto would mark an odd move for a holding company meant to promote domestic businesses. If it is indeed a sovereign wealth fund, it appears to be the first to own crypto directly.
Asset managers have speculated for several years that state-backed funds are starting to buy up cryptocurrency. For now, the only known links appear when these funds buy stakes in companies that own crypto, said Duncan Bonfield, CEO of the International Forum of Sovereign Wealth Funds. For example, the Norwegian State Pension Fund – the world’s largest sovereign wealth fund – is a shareholder in business intelligence firm MicroStrategy, whose huge bitcoin holdings meant the fund owned 600 bitcoins in 2020. Singapore’s $403 billion fund Temasek has also been widely theorized to have held crypto , but rejected the claim last year.
“We have not seen any real interest in cryptocurrency as an asset class and we do not believe any of our members have an allocation to crypto in their portfolios,” Bonfield said Forbes.
The Kingdom of Bhutan, located between China, Nepal and India, first opened its borders to foreigners in 1974 in an effort to boost its economy through peak tourism. Before Bhutan temporarily banned foreign visitors as a result of the pandemic, tourism had become one of its most lucrative exports, alongside hydropower and agriculture. And a number of open partnerships suggest the nation saw similar benefits in crypto as well.
In 2020, Druk hosted a panel of blockchain advocates “to increase knowledge among our local stakeholders” and “potentially entice the industry through education and investment in the coming years.” A year later, crypto exchange Ripple announced it was partnering with Bhutan to pilot a “digital central bank currency” built 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 so it intends to combat what it called an “attack” on crypto.) Shortly thereafter, Bhutan began experimenting with NFT art and issuing carbon credits on the blockchain.
Neither Druk nor Ripple responded to questions about their digital currency pilot program and whether it is ongoing. InfraBlocks Technologies, a Singaporean technology firm hired to help Bhutan develop its tokenized carbon credit platform, said the project would have a commercial launch later this year. “We have completed the pilot and created a marketplace for trading small hydro projects,” says Shubhomoy Ray, Managing Partner and CEO of Infrablocks.
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