Druk Holding and Investments (DHI), the Kingdom of Bhutan’s sovereign investment arm, reportedly holds millions of dollars in cryptocurrencies, but has never publicly disclosed the extent of its crypto portfolio. According to a report released by Forbes, the fund has grown its crypto portfolio and has invested in bankrupt crypto firms BlockFi and Celsius.
DHI is estimated to manage around $2.9 billion in assets, making it a significant player in the crypto investment world. The funds came to light following the 2022 crypto contagion, which saw companies such as Celsius and BlockFi file for bankruptcy.
The Forbes report revealed that DHI withdrew over $65 million and deposited almost $18 million in crypto, as shown by a filing from Celsius. However, BlockFi lawyers filed a complaint against DHI to reclaim outstanding assets, alleging that the fund defaulted on its $30 million loan in March. BlockFi claimed that DHI refused to repay the loan in full after liquidating the 1,888 Bitcoin collateral, worth $76.5 million at the time.
On the other hand, DHI CEO Ujjwal Deep Dahal, said in a statement to Forbes that the issue was confidential and highlighted that the “matter with BlockFi has been settled.” Interestingly, DHI has remained tight-lipped about its crypto holdings and has not released any public statements about its involvement with BlockFi or Celsius.
Celsius and BlockFi were two of the most prominent bankruptcy filings within the crypto space in 2022. On July 14, Celsius filed for Chapter 11 reorganization, also known as a bankruptcy filing. Since then, the embattled crypto lender has been dealing with bankruptcy proceedings and is working on a restructuring plan.
Similarly, on November 28, BlockFi filed for bankruptcy after being affected by the infamous collapse of the FTX exchange. Both firms were once major players in the crypto lending space, but their downfall highlights the risks associated with investing in crypto assets.
DHI’s move into cryptocurrencies is noteworthy, as it suggests that even sovereign wealth funds are beginning to diversify their assets into the digital realm. Previously seen as a risky and speculative investment, crypto assets have gained mainstream acceptance over the past few years, with many institutional investors, including pension funds, hedge funds, and family offices, adding cryptocurrencies to their portfolios.
Investment in cryptocurrencies has been driven by factors such as their decentralized nature, which provides a degree of security and privacy, and their potential for high returns. According to data from Coinmarketcap, the total cryptocurrency market capitalization currently stands at around $2.2 trillion, highlighting the growing popularity of the asset class.
However, investing in cryptocurrencies can also be risky, as exemplified by the failure of firms such as Celsius and BlockFi. Investors must navigate the volatility of the market, the lack of regulatory oversight, and the potential for fraud or hacking. Cryptocurrencies also face significant environmental criticism for their high energy consumption and their impact on global emissions.
The growth of crypto investments by sovereign wealth funds highlights the need for greater transparency and regulation within the crypto space. As more mainstream investors adopt cryptocurrencies, regulators will be forced to take a more active role in overseeing the market.
In recent years, regulatory bodies such as the Securities and Exchange Commission (SEC) have been scrutinizing the crypto industry, and several countries have implemented regulations to protect investors. However, there is still a long way to go before the crypto market achieves the same level of regulatory oversight as traditional financial markets.
Furthermore, investors must also be mindful of the environmental impact of their investments. The cryptocurrency industry has been criticized for the energy-intensive mining process required to generate new coins, and the high levels of carbon emissions associated with crypto mining. The industry is now working to develop more sustainable mining practices, and some crypto firms have committed to become carbon neutral or even carbon negative.
In conclusion, DHI’s move into cryptocurrencies highlights the growing acceptance of digital assets by mainstream investors, even in traditionally risk-averse sectors such as sovereign wealth funds. This trend is likely to continue as cryptocurrencies become more widely accepted and regulated. However, investors must remain mindful of the risks associated with investing in cryptocurrencies, and regulators must step up to ensure greater transparency and oversight within the industry. The crypto market has the potential to bring about positive change, but only if it operates within a framework that prioritizes sustainability, transparency, and accountability.
