The Himalayan kingdom has quietly been dumping millions of dollars into bitcoin and other cryptocurrencies. Its investments, which have never been publicly disclosed, were revealed in the bankruptcy filings of lenders BlockFi and Celsius.
By Iain Martin and Sarah Emerson, Forbes Staff
Among the world’s most isolated nations, Bhutan is known for its sweeping vistas, mountaintop monasteries and a Gross National Happiness Index that prioritizes wellbeing over economic growth. With an economy largely built on agriculture and forestry, and infrastructure that began supporting cell phones just two decades ago (traffic lights are still on the horizon), it’s hardly a place one would 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 Forbes, Bhutan’s $2.9 billion sovereign investment arm was a customer 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 homegrown assets: a local cheesemaker, several hydropower plants and the Royal Bhutan Airlines, which boasts a grand total of five planes. When Druk was established in 2007 through a royal charter from King Jigme Khesar Namgyel Wangchuck, it was to safeguard 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, even though it operates more like a state-owned enterprise. Today, it oversees 21 domestic companies.
But since at least 2022, Druk has also cultivated a secret crypto portfolio. It was inadvertently exposed amid the fallout of last year’s crypto contagion, which saw the bankruptcy of numerous companies including FTX and another major lender, Voyager. It’s unclear whether Druk’s holdings are tied to recent modernization initiatives in Bhutan, such as a biometric digital identity platform whose first user was the 7-year-old crown prince. But its disclosure raises questions about the reclusive nation’s relationship to the turbulent crypto economy.
In the three months shown in the Celsius filing, 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, served a complaint to Druk in Thimphu, Bhutan’s capital and home to its royal family. BlockFi is accusing the fund of defaulting on its repayment of 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 U.S. 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 do not have any comments as the matter with BlockFi has been settled. We are not able to comment due to confidentiality,” Druk’s CEO Ujjwal Deep Dahal told 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 paid back and how its 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 only target of its attempts to reclaim outstanding assets.
Months earlier, Druk was also outed as an institutional customer of Celsius, one of the world’s largest crypto lenders that petitioned for Chapter 11 in July, blaming poor investments and market declines. In October, Celsius released a document containing more than 14,000 pages of user data that included account names, addresses and transactions. These records showed that Druk Holding & Investments, as well an account called the “Druk Project Fund,” made scores of trades 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 filing, 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 noted their intent to seek “clawbacks” of deposits made within 90 days of its bankruptcy, it’s 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 crypto
Druk’s investment of tens of millions of dollars in crypto would mark a strange move for a holding company meant to promote domestic ventures. If it is indeed a sovereign wealth fund, it would appear to be the first to directly own crypto.
Wealth managers have speculated for several years that government-backed funds are beginning to buy up cryptocurrency. For now the only known links emerge when these funds buy stakes in companies that own crypto, says Duncan Bonfield, chief executive 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 of business intelligence firm MicroStrategy, whose massive bitcoin holdings meant that the fund incidentally owned 600 bitcoin as of 2020. Singapore’s $403 billion fund Temasek has also been widely theorized to have held crypto, but denied the claim last year.
“We have seen no 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 told Forbes.
Sandwiched 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, alongside hydropower and agriculture. And a series of open-ended partnerships suggest the nation saw similar benefits in crypto as well.
In 2020, Druk hosted a panel of blockchain advocates “to enhance knowledge amongst our local stakeholders” and “potentially entice industry through education and investment in the years to come.” A year later, crypto exchange Ripple announced it was working with Bhutan to pilot a “central bank digital currency” built on its proprietary XRP ledger. (Ripple has been engaged in a lawsuit with the U.S. Securities and Exchange Commission since 2020 for allegedly selling unregistered securities. The company said it intends to fight what it called an “attack” on crypto.) Shortly after, 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’s ongoing. InfraBlocks Technologies, a Singaporean technology firm that was 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 creating a marketplace for trading on small hydro projects,” says Shubhomoy Ray, cofounder and president for Infrablocks.
