Kazakhstan Proposes Electricity Price Hikes and Taxes Targeting Crypto Miners

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The Kazakh government is considering a three-pronged proposal to charge crypto miners significantly more to operate in the country, which could make Kazakhstan less attractive to the industry.

On February 4, Kazakhstan’s First Deputy Finance Minister Marat Sultangaziyev proposed a price increase from $0.0023 per Kwh to $0.01 (about a 335% increase) specifically for crypto miners. He also proposed a tax on each individual graphics card (GPU) and piece of equipment needed to mine crypto. He compared the video tax card to how casinos are taxed for every table they run, whether the table is active or not.

The third part of his proposal was to remove mining equipment from a value added tax (VAT) exemption.

Bitcoin mining requires the use of specific hardware to perform the mathematical calculations needed to create new blocks on the blockchain. Larger mining operations house over 10,000 mining rigs, including ASICs (application-specific integrated circuits), GPUs, racks, cooling units, and associated facilities.

Until political unrest forced the government to restrict internet access last month, Kazakhstan became one of the most popular destinations for cryptocurrency miners following China’s ban on cryptocurrency. mining last summer. Around January 5, the Bitcoin network’s hash rate dropped 13.4% in one day from around 205 exahashes per second (EH/s) to 177 EH/s due to the brief shutdown in Kazakhstan. .

BIT Mining, a major Bitcoin mining operation that moved from China to Kazakhstan last July, said in January that political unrest would not force it to move its operations elsewhere. However, this was before the power and tax increases were proposed.

Cheap electricity costs and proximity to China have attracted miners fleeing Chinese authorities amid the crackdown in the country. This led to Kazakhstan becoming the second largest producer of hashing power for Bitcoin behind the United States, producing around 18% of the network’s hashrate in August 2021 according to the University of Cambridge. It may become less desirable for new and existing miners to call it their base of operations if the crippling taxation proposals take effect.

It should also be noted that Kazakhstan has been struggling with power supply issues since late last year, around the same time crypto miners arrived from China. The country has seen an 8% increase in domestic electricity consumption through 2021, leading the government to consider building a nuclear power plant to ease pressure on the power grid and keep energy costs low .

Related: All eyes on Asia: Crypto’s new chapter after China

Cheap electricity seems to be the most important factor attracting miners. Cointelegraph reported on January 27 that the United States cannot provide the cheapest electricity and therefore “cannot hold the title of mining champion for long.” Removing this benefit from miners in Kazakhstan could mean the ruin of the country’s ambitions to extract $1.5 billion from miners over the next 5 years.


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