In May 2023, Kazakhstan’s share of the worldwide Bitcoin mining hashrate stood at 4%, down from its peak of 18% in October 2021. Kazakhstan’s mining industry boomed between 2020 and 2021, pushed by low cost electrical energy, internet hosting demand, entry to low cost Chinese machines, relaxed rules, and tax advantages, in line with a Hashrate Index report.
With the rise in hashrate share, Kazakhstan’s whole Bitcoin mining load jumped to 1.5 GW in October 2021 from 200 MW a yr and a half in the past. Unable to deal with the load, the nation’s power supplier began rationing energy provide to Bitcoin miners in September 2021. So miners might solely use costly electrical energy imported from Russia, inflicting many miners to go bankrupt, the report famous.
The nation carried out the brand new regulation “On Digital Assets in the Republic of Kazakhstan” on April 1. The regulation requires miners to acquire licenses to function and use solely licensed mining swimming pools and crypto exchanges. It additionally places miners final in line for energy provide and launched a mining-related electrical energy tax.
Understanding the impression of the brand new rules
Firstly, the brand new regulation requires all mining swimming pools to be licensed and report their earnings to the Kazakhstan authorities for taxation. The miners and crypto exchanges must be registered within the Astana International Financial Centre (AIFC), as per the brand new rules.
Secondly, miners are required to promote a part of their Bitcoin holdings on regionally licensed exchanges — there are presently seven exchanges miners can select from, together with Binance. Currently, miners have to promote 25% of the Bitcoin regionally whereas by 2024, they’ll be required to promote half. The requirement will go as much as 75% by 2025.
Thirdly, as per the brand new regulation, miners can solely purchase energy by means of the nationwide electrical energy public sale system KOREM, which could have a separate miner-focused buying and selling platform. Basically, the nationwide grid operator will decide how a lot electrical energy is “excess” and put it up for public sale and miners must win the public sale to purchase energy. The quantity of energy that will probably be out there for public sale is not going to be enough for all Kazakhstan miners, who must look in direction of different sources of energy technology.
Fourthly, if miners purchase energy by means of the public sale system or import it from Russia, they must pay a tax, which units the ground value of electrical energy at $0.055 per kWh. This is a considerably excessive charge, which suggests miners can not depend on buying energy in the long run. The new regulation additionally applies a flat tax of $0.022 per kWh on electrical energy from renewable sources.
The future is foggy
According to the report, the brand new regulation might both present regulatory stability or its stringent taxation might kill the industry. But it stays to be seen how the regulation will actually impression the miners, which makes the longer term unsure.
In the meantime, Kazakhstan miners have to hunt for brand new sources of electrical energy, with fuel, wind, and photo voltaic holding probably the most potential, as per the report.
Furthermore, the instability over the previous yr has made international traders averse to investments in Kazakhstan, which has decreased the short-term potential of the industry. However, the report famous that the nation’s mining industry holds long-term potential.
