As the crypto sector prepares to tap new opportunities in the upcoming Bitcoin halving, miners in Kazakhstan have expressed concerns on the limitations imposed by the government on crypto mining. In October 3 report the crypto miners advised President Kassym-Jomart Tokayev to reconsider lowering the energy costs on mining activities.
The report was co-authored by eight local mining companies in Kazakhstan urging the President to reduce the energy prices. The open letter was formulated by the best-performing mining companies in the region, including BCD Company, Green Power Solution, VerCom, Kinur Invest, AI Solution, TT Tech Company and KZ System.
Impact of Energy Cost on Bitcoin Mining
In the report, the miners regretted that the spiking energy prices had created a “very stressful condition,”in the crypto mining sector. The miners lamented that the unattractiveness of the Kazakhstan crypto industry has compelled many investors to wind down operations.
In June, President Tokayev announced plans to increase the utility prices in July by 10% to 30 % to generate capital for developing infrastructure. The doubling of the energy prices in Kazakhstan affected the performance of most businesses.
Following the lifting of the price of fuel and other petroleum products in Kazakhstan, the community held widespread demonstrations to oppose the government’s decision. Surprisingly, the ugly-looking business environment in Kazakhstan has also affected its global position in Bitcoin mining.
The report indicates that Kazakhstan ranked second after the US in Bitcoin mining in 2022. However, with the ongoing increase in energy costs and mining restrictions in the region, Russia overtook Kazakhstan in Bitcoin mining capacity this year.
Miners Urges the Government to Reduce Energy Prices
According to the letter, the Bitcoin miners lamented that the increase in energy prices has undermined the government’s efforts in regulating the crypto industry and mining activities. Also the troubled miners blamed the government for creating unfavourable conditions, such as increasing taxes for miners that undermined mining activities in the region.
In the recommendation the miners stressed on the need to take proactive measures to restore the faint digital mining sector in the region. They lamented that failure to implement measure could lead to its non existence of the sector in future. Besides increasing the energy cost in May this year, the Kazakhstan government imposed a new taxing regime on crypto mining.
The new taxation approach will require the crypto miner to remit taxes based on electricity consumption. The changes in the national tax code will subject Bitcoin miners utilizing low electricity sources to pay high tax. Reportedly the new tax regime aimed at promoting the use of renewable energy in Kazakhstan.
Kazakhstan Tighten Regulations on Crypto Assets
Besides the taxes the measure imposed by the Kazakhstan authority aims to meet the growing demand for electricity. In 2021, when China restricted crypto activities, most investors migrated to Kazakhstan to explore the viable opportunities in Bitcoin mining sector.
Months later, political and high-profile investors in the region invested heavily in stimulating the growth of the mining industry. After the Bitcoin mining realized the desired growth some of the investors engaged in illegal mining activities. The rise of unlawful mining activities compelled the Kazahk authority to take legal actions.
Report indicate that around 106 illegal crypto mines were closed by the regulators. Consecutively, the government agreed to tighten the rules governing crypto mining in the region to scare non compliant firms.
Under the new regulation, regulated crypto miners were only allowed to consume surplus energy from the Kazakhstan national grid. Also, to ensure conformity with the new rule the government authorized licensed miners to be connected to the national grid .
