In Could 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 business boomed between 2020 and 2021, pushed by low-cost electrical energy, internet hosting demand, entry to low-cost Chinese language machines, relaxed rules, and tax advantages, in keeping 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 12 months and a half in the past. Unable to deal with the load, the nation’s vitality 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 Property within 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 influence 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 need to be registered within the Astana Worldwide Monetary Centre (AIFC), as per the brand new rules.
Secondly, miners are required to promote a part of their Bitcoin holdings on domestically licensed exchanges — there are at present seven exchanges miners can select from, together with Binance. Presently, miners have to promote 25% of the Bitcoin domestically 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 via the nationwide electrical energy public sale system KOREM, which may have a separate miner-focused buying and selling platform. Principally, the nationwide grid operator will decide how a lot electrical energy is “extra” and put it up for public sale and miners need to win the public sale to purchase energy. The quantity of energy that will likely be out there for public sale is not going to be adequate for all Kazakhstan miners, who need to look in the direction of different sources of energy technology.
Fourthly, if miners purchase energy via the public sale system or import it from Russia, they need to pay a tax, which units the ground worth of electrical energy at $0.055 per kWh. It is a considerably excessive price, which implies miners can’t depend on buying energy in the long run. The brand new regulation additionally applies a flat tax of $0.022 per kWh on electrical energy from renewable sources.
The long run is foggy
In response to the report, the brand new regulation might both present regulatory stability or its stringent taxation might kill the business. Nevertheless it stays to be seen how the regulation will actually influence the miners, which makes the long run unsure.
Within the meantime, Kazakhstan miners have to hunt for brand spanking new sources of electrical energy, with gasoline, wind, and photo voltaic holding probably the most potential, as per the report.
Moreover, the instability over the previous 12 months has made overseas traders averse to investments in Kazakhstan, which has decreased the short-term potential of the business. Nevertheless, the report famous that the nation’s mining business holds long-term potential.
