Tether mining exit from Uruguay exposes energy cost and debt tensions

After months of rising costs and public scrutiny, the global stablecoin issuer confirmed that tether mining in Uruguay is being drastically scaled back.

Why is Tether shutting down its mining operations in Uruguay?

Global crypto-finance company Tether has confirmed it is ceasing its mining operations in Uruguay and laying off 30 of its 38 employees, citing unsustainable energy costs and uncompetitive electricity tariffs. The move, disclosed after a meeting at the National Directorate of Labour (Dinatra), ends an ambitious infrastructure push that had been announced just months earlier.

The decision became public when sources from the Ministry of Labour confirmed the closure to El Observador during a recent Dinatra session. Moreover, the announcement immediately triggered debate over the country’s Uruguay electricity tariffs and whether the regulatory framework can support large-scale digital infrastructure projects.

What happened to Tether’s $500 million investment plan?

When Tether’s team arrived in Uruguay, executives outlined a bold plan to invest $500 million in the country. This included building three data processing centers in Florida and Tacuarembó that required approximately 165 MW of power, alongside a 300 MW renewable energy park. However, the project quickly ran into economic headwinds.

Only around $100 million of the planned investment was actually deployed before the venture became financially unviable. Out of that total, Tether had spent over $100 million on development and had set aside another $50 million specifically for infrastructure that state utility UTE and the National Interconnected System would own. That said, the company ultimately halted further capital deployment as costs mounted.

How did energy pricing and tariffs undermine the project?

According to local reports, the terms of Tether’s power contract and the 31.5 kV toll fees applied in Florida significantly increased operating expenses. Moreover, rising crypto mining energy costs globally added further pressure to the business case. Tether reportedly asked regulators and UTE for a more competitive pricing scheme multiple times starting in November 2023.

One option the company proposed was shifting to 150 kV tolls and adjusting the power purchase agreement to better match the scale of its planned infrastructure. Several analysts argued this change could have helped UTE save money and avoid building unnecessary grid structures. However, no agreement was reached, and the economic model for large-scale mining tether activities in the region deteriorated.

Did unpaid electricity bills force the shutdown?

Exit plans first leaked publicly in early September, when local outlet Telemundo reported that Tether had decided to halt its crypto mining operations and future plans in Uruguay. According to that report, the National Administration of Power Plants and Electric Transmissions (UTE) cut off power supply to the company’s facilities because it had not paid a $2 million electricity bill for May. The power dispute sharpened scrutiny of the project’s finances.

Telemundo further stated that Tether owed additional debts of approximately $2.8 million from other local projects, bringing the total amount owed to roughly $4.8 million, excluding fines or extra charges. This information had been published two days earlier by Busqueda. However, Tether publicly denied that it was leaving Uruguay because of a $4.8 million debt problem with the state-owned utility, arguing that the situation was more nuanced.

How does Tether respond to debt and exit rumors?

In statements to the media, Tether insisted it is still evaluating the best way to move forward in Uruguay and the broader Latin American region. The company said that reports claiming a full withdrawal from the country do not accurately reflect reality. Moreover, executives emphasized that unresolved contract terms, rather than a single unpaid bill, lie at the core of the dispute with UTE.

Tether acknowledged the outstanding amounts and said that the local firm responsible for operating the mining sites has been engaged in talks with government authorities to resolve the issue. The company also reiterated that the tether mining initiative had been designed around long-term renewable energy park plans, which are now being reassessed in light of current market and regulatory conditions.

Is Tether completely abandoning Uruguay?

Despite the layoffs and suspension of active mining, Tether maintains that it is not ruling out future activity in Uruguay. Instead, it is reviewing alternative structures that might allow it to participate in the country’s energy and technology sectors under more favorable terms. However, the rollback of the original project highlights how quickly large-scale tether investment rollback decisions can materialize when costs rise.

In its most recent public comment, the company said: “Tether supports these efforts and aims for a positive solution that shows our long-term commitment to sustainable opportunities in the area.” That said, whether any new agreement will restore confidence after the tether layoffs uruguay remains uncertain, as investors and policymakers reassess the risks of power-intensive digital infrastructure projects.

For now, Tether’s curtailed plans in Uruguay underscore the tension between ambitious digital asset infrastructure and local energy economics, with unresolved debt claims and tariff disputes likely to shape any future return to the country.