Tether pulls out of Uruguay! The $500 million mining dream shattered, owes $5 million in electricity fees and faces power cut.

Stablecoin giant Tether has halted its large-scale crypto mining operations worth $500 million in Uruguay, citing high energy costs and a lack of tariff framework. The company has laid off 30 employees in Uruguay, with the original total being 38. The immediate trigger for Tether's shutdown was in September this year, when the national power supplier UTE cut off electricity in late July due to unpaid electricity bills totaling nearly $5 million.

Tether's 500 million dollar mining plan in Uruguay: a timeline

In May 2023, Tether partnered with a local licensed company to launch a sustainable Bitcoin mining operation in Uruguay. The company's CEO, Paolo Ardoino, stated that this South American country “has a strong and reliable power grid capable of meeting the needs of modern industry.” Tether initially planned to invest $500 million, which includes the construction of three data processing centers in Florida and Tacuarembó.

In addition, the company plans to build a 300 megawatt wind and solar power generation park. This vertical integration strategy aims to ensure the stability of energy supply and cost controllability, as the largest cost in the mining business is electricity. If they can build their own power generation facilities, it theoretically can significantly reduce long-term operating costs and decrease reliance on the national power grid.

However, Tether only spent 100 million USD and additionally allocated 50 million USD for infrastructure. These facilities will become the property of UTE and the national interconnection system. This means that a significant portion of the 150 million USD invested by Tether turned into contributions to Uruguay's national infrastructure, rather than assets controlled by Tether itself. This arrangement seems particularly ironic after the project's failure, as Tether not only failed to achieve its investment goals but also left infrastructure behind in Uruguay.

Tether Uruguay Plan's Discrepancy

Planned Investment: $500 million to build three data centers + 300 megawatt power park

Actual Investment: Only 100 million USD operating expenses + 50 million USD infrastructure

Investment Completion Rate: 30%, far below the original target.

Final Result: Complete withdrawal, layoff of 30 people (accounting for 79% of total employees)

From its launch in May 2023 to its withdrawal in 2025, Tether's operations in Uruguay lasted only about two and a half years. This duration indicates that the project did not fail due to short-term fluctuations or unexpected events, but rather gradually uncovered fundamental economic viability issues during its operation.

Owing electricity bills of 5 million USD leads to power outage, becoming a catalyst for withdrawal of investment

The news about Tether stopping operations in Uruguay originated in September, after the national electricity supplier (UTE) cut off power in late July due to unpaid electricity bills totaling nearly $5 million. This detail is highly ironic: the world's largest stablecoin issuer, managing over $130 billion in USDT market value, was actually disconnected for owing $5 million in electricity bills.

This situation has raised questions on multiple levels. First of all, from a financial management perspective, 5 million dollars is a negligible amount for a company the size of Tether. The interest income from USDT reserves every quarter amounts to hundreds of millions or even billions of dollars. Why would they default on such a small payable? This may suggest that Tether does not prioritize the Uruguay project sufficiently, or that an internal decision to withdraw investment has already been made, just waiting for the right moment to announce it.

The cryptocurrency giant is negotiating through its local subsidiary Microfin to secure a long-term power supply agreement. However, the failure to repay debts ultimately led to a power outage. “We believe in the potential of this country, but for a project of this scale, a competitive and predictable tariff framework is crucial. The failure to reach an agreement has forced us to rethink our strategy,” Tether stated in a letter to UTE in September.

This statement reveals the core of the problem: energy costs and tariff frameworks. Although Uruguay has a reliable power grid, electricity prices are not competitive for energy-intensive mining businesses. More importantly, Tether hopes to obtain long-term preferential electricity price agreements, but negotiations with UTE have clearly failed to achieve satisfactory results. In the absence of clear long-term tariff framework guarantees, Tether cannot determine future operating costs, and this uncertainty ultimately led to the decision to withdraw investments.

According to local media “Observer News”, the company has laid off 30 people in Uruguay, with a total of 38 former employees. Tether Holdings confirmed the layoffs to the Ministry of Labor and Social Security (MTSS) during a meeting held on Tuesday at the headquarters of the National Labor Directorate (Dinatra). The layoff of 30 people means that only 8 people will be retained, and these 8 may be responsible for the project's closure and asset disposal.

Tether's Global Mining Strategy Shifts to Paraguay and El Salvador

The USDT stablecoin provider announced a broader plan aimed at controlling about 1% of the global Bitcoin network share. In July this year, this crypto assets giant collaborated with a southern sustainable production company to explore strategic cooperation in the field of Bitcoin mining. Despite recent setbacks in Uruguay raising questions about the feasibility of energy-intensive mining in high-cost markets, Paraguay and Texas have attracted miners with cheaper electricity.

Tether previously announced plans to establish Bitcoin Mining facilities in Paraguay and El Salvador, with each facility having a capacity between 40 to 70 megawatts. This strategic shift shows that Tether has not abandoned the mining business itself, but is looking for more cost-effective locations. Paraguay has abundant hydroelectric resources, and its electricity costs are highly competitive globally. El Salvador is the world's first country to adopt Bitcoin as legal tender, and the government is very friendly towards the crypto industry.

Tether's strategic adjustment from withdrawing investments in Uruguay to shifting towards Paraguay and El Salvador reflects the fundamental economic logic of the mining business: electricity costs are a decisive factor. The failed experience in Uruguay shows that even with a stable power grid and political environment, if electricity prices lack competitiveness, the mining business is difficult to sustain. If the total scale of 300 megawatts is realized in Uruguay, it would become one of the largest single electricity consumers in the country, and negotiations over electricity prices at such scale are naturally complex and filled with political considerations.

The scale of a single facility ranging from 40 to 70 megawatts indicates that Tether has adopted a more cautious expansion strategy. Unlike Uruguay's one-time plan of 300 megawatts, this decentralized deployment can reduce the risk of a single market and allows for flexible adjustments based on local electricity costs and policy environments. If a facility in Paraguay or El Salvador encounters issues, it will not affect the overall crypto mining strategy.

Tether's goal of controlling about 1% of the global Bitcoin network still exists. Based on the current global Bitcoin hash rate, 1% means requiring hundreds of thousands of ASIC mining machines and hundreds of megawatts of power supply. The failure in Uruguay is merely a setback in this grand plan, and Tether is clearly learning from the lessons, looking for more suitable locations for redeployment.

Energy costs are key to survival in crypto mining

The case of Uruguay highlights the extreme sensitivity of the crypto mining business to energy costs. Bitcoin mining is a highly competitive industry, and miners' profit margins depend on three main factors: Bitcoin price, hash rate difficulty, and electricity costs. With Bitcoin prices and hash rate difficulty relatively fixed, electricity costs become the key variable determining profit or loss.

Tether mentioned in the letter that “a competitive and predictable tariff framework is crucial,” which reveals another aspect of the issue: it is not just the high or low electricity prices that matter, but more importantly, the predictability of prices. The mining business requires long-term stable operations to recover equipment investments; if electricity prices fluctuate significantly due to policy changes, it will make investment return calculations extremely unreliable. Uruguay clearly cannot provide such stability guarantees.

The global mining industry is undergoing a geographic reshuffling. Texas, Paraguay, and El Salvador have attracted a large number of mining companies due to their cheap and stable electricity supply. In contrast, regions with high energy costs or unstable policies are losing competitiveness. The withdrawal case of Tether serves as a warning for other crypto companies considering investment in Uruguay.