Main Points :
- Bhutan is migrating its national digital identity (NDI) system from Polygon to Ethereum, with full credential migration expected by Q1 2026.
- This makes Bhutan the first nation to anchor a population-scale ID system on a public Ethereum blockchain.
- Bhutan has built up a large sovereign Bitcoin reserve—mined via hydropower—valued over $1 billion, with recent sales and transfers sparking market interest.
- The move underscores Bhutan’s positioning as a “crypto nation,” leveraging blockchain not just for finance but for governance and identity systems.
- Practical challenges remain: scalability, privacy (especially zero-knowledge proofs), cost, and global interoperability with other identity systems.
Introduction: A Himalayan State Bets Big on Blockchain Governance
In a major announcement that could influence how states globally think about digital identity, Bhutan has declared its intent to migrate its National Digital Identity (NDI) system from Polygon to Ethereum. The technical integration is already completed, and the full migration of resident credentials—affecting approximately 800,000 citizens—is expected by the first quarter of 2026.
At the launch ceremony, Ethereum co-founder Vitalik Buterin, Bhutan’s Prime Minister Tshering Tobgay, Crown Prince Jigme Namgyel Wangchuk, and Ethereum Foundation President Aya Miyaguchi were present—a gesture signaling the symbolic and technical significance of this transition.
This decision marks Bhutan as the first country in the world to anchor a national, population-scale identity system directly on Ethereum.
But this shift is only one piece of Bhutan’s broader blockchain strategy: concurrently, the Himalayan nation has quietly become one of the largest sovereign holders of Bitcoin, mined via hydroelectric energy—combining environmental ideals with crypto ambition.
From Polygon to Ethereum: Why the Move?
Background: The “Three Blockchain” Evolution
Bhutan’s NDI has not always lived on Ethereum. Previously:
- The system initially used Hyperledger Indy (a permissioned distributed ledger) in earlier trials.
- In August 2024, Bhutan switched to Polygon as its platform for decentralized identity operations, adopting the CREDEBL protocol layer and zero-knowledge techniques to improve scalability and interoperability.
This “third blockchain” transition—from Indy to Polygon to Ethereum—underscores that the path to a stable identity infrastructure is evolutionary rather than instantaneous.
Why Ethereum?
Several motivating factors appear to lie behind Bhutan’s decision:
- Immutability and credibility of Ethereum
Ethereum remains the most battle-tested public smart contract blockchain in operation, with deep developer ecosystems, mature tooling, and security assurances. By anchoring identity on Ethereum, Bhutan taps into that established credibility. - Interoperability and global standards
Using Ethereum increases the possibility of interoperation with decentralized identity (DID) standards and global credential frameworks. Bhutan may more easily integrate with external APIs, identity wallets, or cross-chain identity ecosystems. - Scalability and architecture
The underlying architecture and layer-2 ecosystem of Ethereum provide more flexible scaling options, particularly when combining rollups, zero-knowledge proofs, and sidechains. The switch indicates Bhutan’s intent to support anticipated growth in identity checks, credentials issuance, and service integrations. - Future value capture
Anchoring identity to Ethereum might also allow Bhutan to tap into token incentives, protocol upgrades, and synergies with broader DeFi and Web3 infrastructures—though the identity layer is separate from ETH token dynamics.
Aya Miyaguchi framed the transition as “deeply inspiring,” stating that it is not only a national achievement but also a step toward an “open and secure digital future.”
The Bitcoin Bet: Bhutan as a Crypto-State
Accumulating Bitcoin via Green Mining
Parallel to its identity experiments, Bhutan has quietly amassed a significant Bitcoin reserve. Since around 2020, the country, through its state-owned commercial arm Druk Holding and Investments (DHI), has deployed mining infrastructure powered by its abundant and carbon-negative hydropower output.
As of mid-2025, Bhutan’s estimated Bitcoin holdings range between ~12,000 to ~13,000 BTC, valued around $1.3 billion—estimates variably pegged between $860 million and $1.3 billion depending on wallet attribution and market price.
These holdings represent a striking share of the country’s economy: in some reporting, nearly 30–40% of Bhutan’s GDP.
This makes Bhutan one of the top sovereign Bitcoin holders globally—surpassing many nations in crypto reserves not through purchases but through self-mining.
Recent Movements: Sales, Transfers, and Market Signals
Bhutan’s Bitcoin reserves have not been static. In 2025, they have begun partial transfers and sales:
- In July 2025, Bhutan sold ~512.84 BTC (valued at ~$59.47 million), while still retaining ~11,411 BTC (~$1.4 billion) according to on-chain tracking.
- In another episode, the government moved ~913 BTC (~$107 million) into new wallets, sparking speculation about potential sell-offs.
- Additional smaller transfers (e.g. $63 million worth of BTC) to multiple wallets were also recorded.
- Meanwhile, some sources note that Bhutan deposited increasing amounts of newly mined Bitcoin into its addresses: between June and mid-2025, ~1,358.64 BTC added, valued at ~$90 million.
These movements suggest the state is actively managing its crypto treasury—rebalancing, realizing gains, or preparing for disciplined treasury management under volatility.
Strategic Implications
Bhutan’s Bitcoin strategy aligns with several national-level ambitions:
- Revenue diversification: As a small, landlocked economy heavily dependent on hydropower, tourism, and aid, Bhutan seeks new revenue sources. Bitcoin mining and strategic reserve accumulation provide a countercyclical income buffer.
- Green crypto branding: Bhutan claims its crypto is “green”—mined via renewable hydropower in a carbon-negative country. Officials argue that each coin mined in Bhutan displaces fossil-fuel-based mining elsewhere, offering an ESG-friendly narrative.
- Monetary hedge and inflation protection: Bitcoin reserves can act as an inflation hedge or foreign-exchange liquidity buffer, especially relevant to small economies vulnerable to external shocks.
- Crypto diplomacy and soft power: As one of the few states with visible crypto strategy, Bhutan gains attention and legitimacy in the Web3 ecosystem—critical if it seeks to attract blockchain-based investment, talent, or institutions.
Practical Considerations and Risks
Scalability and Cost
Shifting identity operations to Ethereum will come with cost pressures. Even with layer-2 scaling solutions, usage-based fees (gas) and architecture complexity must be managed carefully. Bhutan must ensure that identity verification (e.g. in government services) remains affordable and performant.
Privacy and Zero-Knowledge Proofs
To protect citizens’ sensitive data, the identity system must employ robust zero-knowledge proofs or credential models that avoid exposing personal data on-chain. The CREDEBL protocol layer (used during the Polygon era) appears to bring such capabilities, and similar or enhanced models will be needed on Ethereum.
Governance, Upgradability & Key Recovery
Government-level identity systems must anticipate upgrades, recovery of lost keys, emergency revocation, and fallback paths. Embedding human governance over cryptographic systems without undermining decentralization is nontrivial.
Interoperability and Adoption
For Bhutan’s identity system to deliver utility beyond national services, it needs adoption by local banks, private sector, cross-border services, and possibly foreign identity verifiers. Compatibility with global DID standards and wallet ecosystems is essential.
Sovereign Risk and Market Volatility
On the Bitcoin side, the addition or sale of sizeable BTC reserves can influence markets (especially for a small holder). Bhutan must guard against volatility risk, avoid dumping, and manage perceptions—especially as some transfers have already triggered speculation.
Moreover, crypto holdings expose the state to regulatory or geopolitical risk (e.g. stance toward Bitcoin, sanctions, regulatory crackdowns).
Projected Timeline and Next Moves
- Q1 2026: Target date for full migration of all citizen credentials to Ethereum.
- Subsequent phases: Bhutan may expand the identity system to support additional services (health, voting, social welfare), integrate with private sector APIs, and possibly explore identity-linked financial tools (e.g. identity attestation for credit).
- Scaling hydropower / Bitcoin mining capacity: To maintain or increase mining throughput, Bhutan aims to scale its hydropower output (current capacity ~3.5 GW, target ~15 GW in next 10–15 years).
- International partnerships: Bhutan may position itself as a “green crypto hub,” attracting ESG-conscious blockchain projects, or offering identity infrastructure as a regional public good.
Summary and Outlook
Bhutan’s decision to migrate its national identity system from Polygon to Ethereum is bold, pioneering, and fraught with technical, governance, and privacy complexities—but it also positions the kingdom as a model for state-level blockchain adoption. By anchoring identity operations on Ethereum, Bhutan seeks interoperability, security, and legitimacy in the global Web3 ecosystem.
Simultaneously, Bhutan’s accumulation of sovereign Bitcoin—via green, hydropower-driven mining—cements its status as a distinctive crypto-nation. While recent transfers and sales indicate active treasury management, the overarching strategy is clear: diversify national revenue, hedge macro risks, and gain influence in digital asset governance.
For readers seeking new crypto opportunities or real-world blockchain use cases, Bhutan’s model offers instructive lessons: combining identity, finances, and state infrastructure on chain; blending sustainability with digital assets; and managing the trade-offs of governance, cost, and privacy.
In the evolving era of Web3, Bhutan’s experiment will be watched closely—if successful, it could spur more nations to move much of their sovereign infrastructure into public blockchains.
