Cryptocurrency mining operators in Kazakhstan, a global powerhouse in Bitcoin mining, have expressed their concerns about soaring energy prices to the country’s President, Kassym-Jomart Tokayev.
Eight prominent cryptocurrency mining companies in Kazakhstan, including BCD Company, TT TECH Limited, KZ Systems, AI Solutions, Green Power Solution, VerCom, and Kinur Invest, jointly penned an open letter outlining their grievances. They depicted the dire situation facing the Kazakh crypto mining industry due to exorbitant energy costs, leading to a significant setback for the sector.
The letter emphasizes that all major players in the industry have suspended their operations and plan to shut down completely within the Republic of Kazakhstan by year-end. These industry executives believe that the escalating prices are undermining the government’s efforts to regulate the broader crypto industry and mining in particular.
The root cause, as detailed in the letter, is the decision to increase taxes on energy consumption for crypto miners. These tax hikes have caused Kazakhstan to lose its prominent status among crypto mining leaders like the United States, Russia, and China, placing the industry on the brink of extinction. The letter underscores the urgency of government intervention, stating that without immediate action, the digital mining industry in Kazakhstan will cease to exist.
Kazakhstan had implemented taxes on digital mining on January 1, 2022, based on the electricity consumed by mining entities. This decision arose from growing national concerns about crypto miners benefiting from the national power grid without shouldering an appropriate tax burden.
Even with the highest tariff, 1 kilowatt-hour (kWh) of taxed electricity in Kazakhstan costs miners approximately $0.067, significantly lower than the pre-tax average of $0.12 per kWh in the United States. According to data from the Kazakh government, the country collected around 3.07 billion tenges (equivalent to $7 million) in tax payments from crypto mining entities in 2022.
The cryptocurrency mining operators’ appeal highlights the urgent need for a balanced regulatory approach that considers the sustainability of the crypto mining industry while addressing the country’s energy concerns.