Tether’s $5 million debt crisis halts Uruguay mining operations

Tether’s ambitious plan to expand Bitcoin mining operations in Latin America through its LATAM Bitcoin Mining Expansion Plan encountered a significant setback when Uruguay’s state electricity company, UTE, cut power to the local partner in late July.

The shutdown occurred due to nearly $5 million in unpaid bills linked to facilities in the Flores and Florida regions. The energy dispute has brought Tether’s expansion efforts in Uruguay to a halt, undermining the company’s vision of harnessing the country’s renewable energy resources to power sustainable Bitcoin mining.

Tether entered Uruguay in 2023 with a strategy centered on leveraging abundant wind and hydroelectric capacity to build eco-friendly mining operations. Its LATAM Bitcoin Mining Expansion Plan was designed to support facilities operated by Microfin, a licensed local partner responsible for securing long-term electricity contracts and building infrastructure crucial to the project’s success.

Financial and contractual tensions stall progress

Key hurdles in Tether’s LATAM Bitcoin Mining Expansion Plan emerged from disagreements over costs and contract guarantees. UTE demanded significant upfront deposits to secure electricity agreements, while Microfin pushed for tariff revisions to manage operational expenses amid fluctuating energy rates.

Although negotiations led to a memorandum of understanding in June aimed at resolving these issues, the failure to clear outstanding debts caused UTE to suspend energy supply, stopping all mining activities.

Strategic implications for Tether and LATAM expansion

Tether has publicly committed to securing about 1% of the global Bitcoin network through mining investments, with hundreds of millions earmarked for projects across South America, including sites in Paraguay where electricity costs are lower. The LATAM Bitcoin Mining Expansion Plan was intended to anchor those ambitions by demonstrating a scalable renewable energy model in Uruguay.

The company has stressed that its stablecoin reserves remain insulated from operational risks linked to mining. Tether sees revenue from mining and energy assets as a way to diversify beyond stablecoin issuance. Earlier this year, it also expanded into Latin American agribusiness, aiming to integrate stablecoin use with commodity trade.

However, the setback in Uruguay raises important questions about the feasibility of energy-intensive mining operations in countries with higher electricity costs and stringent grid requirements. Paraguay’s more favorable energy pricing and Texas’s permissive regulatory environment have attracted miners seeking predictable costs, while Uruguay’s insistence on costly guarantees impedes growth.

Outlook: Uncertain future for Uruguay mining expansion

Tether’s LATAM Bitcoin Mining Expansion Plan remains in limbo as talks with UTE continue, but no clear timeline exists for resuming operations. The dispute highlights the volatility and risk facing crypto firms that tie stablecoin businesses to capital-intensive, energy-dependent mining ventures.

As the situation develops, Tether has not disclosed whether it plans to scale back or abandon its ambitions in Uruguay. The outcome will have implications not only for Tether but also for the broader narrative of sustainable Bitcoin mining in Latin America.