ALMATY, Nov 9 (Businesshala) – Kazakhstan is struggling to meet the energy needs of its booming cryptocurrency mining industry, which is thriving due to cheap electricity and the exodus of crypto miners from neighboring China.
According to the Cambridge Center for Alternative Finance, the Central Asian country of 19 million has become the second largest bitcoin mining destination in the world after the United States in recent months.
Now the government is trying to decide how to tax and regulate the largely underground and foreign-owned industry, which has forced the former Soviet republic to import electricity and ration domestic supplies.
In addition, local mining farms are mostly operated by old coal plants which, themselves, with coal mines and entire cities built around them, are a headache for authorities as they seek to decarbonize the economy.
While some see crypto as a way to a quick fortune, many governments fear that privately operated highly volatile digital currencies could undermine their control of monetary systems, fueling financial crime and causing investors to lose money. can hurt. China banned all crypto transactions and mining last month.
Crypto mining, the energy-intensive computing process through which bitcoin and other tokens are created, is seen by many as harming global environmental goals.
The Kazakh government plans to crack down on previously unregistered “gray” miners, which it estimates could consume twice as much electricity as “white” or officially registered ones.
Deputy Energy Minister Murat Zurebekov said this month, “I think we will have the directive (the power to limit unregistered miners) issued before the end of this year, because this issue cannot be delayed any longer.” “
He did not explain how officials planned to locate the “gray” miners, whose farms are often hidden in basements or abandoned factories. But sources say that their heat signature can be detected from satellites.
The ministry says that “gray” mining can consume up to 1.2 GWt of electricity, which combined with 600 MWt of “white” miners comes to about 8% of Kazakhstan’s total production capacity.
Some “gray” miners say they are considering going “white” but are unsure about how heavily they could be taxed. Tax code amendments passed in June provide for a tax of 1 ten ($0.0023) per kilowatt-hour, but there are also proposals to make miners pay more for energy.
“The tax the government is planning to introduce is something that miners can pay,” said one “grey” miner on condition of anonymity. “But it is not clear what demands the government can put forward.”
The root of the problem lies in Kazakhstan’s state-regulated and artificially low electricity prices, which the government does not want to increase as it struggles to control inflation.
“Price reform is certainly necessary,” says Eric Livny, regional economist at the European Bank for Reconstruction and Development.
“In Kazakhstan we have a heavy dependence on coal with very low prices … but this creates huge problems in meeting the obligations that Kazakhstan has taken in relation to greening the economy.”
Kazakhstan has one of the largest coal mines in the world, Bogatyr, and the nearby town of Ekbastuz developed around the coal industry.
Some crypto miners say the government may let their industry offset taxes with investments in renewable energy.
“Kazakhstan has an opportunity to develop its weak power sector at the expense of others and make some money on top of it,” says Yedige Davletgliyev, an engineer at Blockchair.com, a blockchain analytics company.