Kazakhstan floats 500% tax increase on Bitcoin miners, leading some to eye relocation

Quick Take

  • Bitcoin miners in Kazakhstan have faced a rough couple of months of internet blackouts and electricity shortages. 
  • As the situation in the country has been slow to stabilize, miners are considering leaving for the US or Russia. 

Kazakh authorities have floated tighter regulatory conditions for bitcoin miners in recent days — a state of affairs that could spur some operations to leave the country for friendlier shores.

As local news outlet Kazinform reported on February 4, Kazakh authorities are looking into increasing the tax on electricity for cryptocurrency miners from one tenge to five tenge (USD$0.0023 to $0.012). 

Marat Sultangaziev, Kazakhstan’s first vice-minister of finance, further suggested requiring crypto miners to pay a monthly tax on equipment, whether or not they earn block rewards or even turn the ASICs on. The vice-minister compared the idea to a similar tax that casino operators pay on their machines.

The day before, Bagdat Musin, Kazakhstan’s minister of digital development, posted on his personal Facebook to attack unregistered “gray” miners for consuming 1 gigawatt of the country’s electricity. 

“Gray miners are severely damaging our energy system. Now the energy costs of illegal mining are estimated to exceed 1 gigawatt,” wrote Musin, inviting those aware of unregistered mining operations to send reports to his office. 

Current rules in Kazakhstan distinguish so-called “gray miners” from so-called “white miners.” White miners are those who have signed on to a new registry at the ministry of digital development. The ministry was working at speed to register miners throughout the end of 2021.

In keeping with that push for registration, Musin further advised unregistered gray cryptocurrency miners to come under the department’s new regime.

The news comes after the government cut off cryptocurrency miners from electricity for most of January, as the country faced widespread energy shortages and massive protests over rising fuel prices. As those protests raged, the government cut off electricity throughout the country, triggering hashrate declines for major pools with exposure.

While internet access has returned, energy remains scarce. Though earlier reports said that Kazakh energy authorities were only planning on blocking electricity to miners until the end of January, multiple miners in the country told The Block that they were still waiting:

Makhat Serikuly, a consultant on mining for BlockchainKZ, told The Block, "We are back online, but electricity is still limited. We had a surplus, but now a deficit, so they are cutting off power to miners.”

Kanat Amren, a Kazakh miner, agreed that the situation was dire. “They can’t work without electricity, and for now, white miners have had their electricity shut off,” said Amren.

As China cracked down on cryptocurrency mining early in 2021, neighboring Kazakhstan, with its cheap electricity, welcomed a flood of miners. It quickly became the second-largest source of Bitcoin’s hashrate, after the US and ahead of Russia.

However, with the situation in Kazakhstan growing less certain, miners are increasingly looking to relocate to the US or Russia, as local miners indicated to The Block.

Didar Bekbau, founder of mining firm Xive.io, has recently tweeted favorably of Russian President Vladimir Putin’s seeming support for continued crypto mining in the country

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