In Might 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 has boomed between 2020 and 2021, pushed by low-cost electrical energy, demand lodging, entry to low-cost Chinese language equipment. , relaxed rules and tax advantages, in keeping with a Hashrate Index report.
With the rise in hashrate share, Kazakhstan’s complete Bitcoin mining load elevated 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 started rationing energy to Bitcoin miners in September 2021. So miners may solely use costly electrical energy imported from Russia, inflicting Bitcoin to go bankrupt. many minors, notes the report.
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 for electrical energy provide and launched a mining-related electrical energy tax.
Perceive the influence of the brand new rules
First, the brand new regulation requires all mining swimming pools to be licensed and report their revenue to the Authorities of Kazakhstan for tax functions. Miners and crypto exchanges have to be registered with the Astana Worldwide Monetary Heart (AIFC), in keeping with the brand new rules.
Second, miners are required to promote a portion of their Bitcoin holdings on domestically licensed exchanges – there are at the moment seven exchanges for miners to select from, together with Binance. At the moment, miners should promote 25% of Bitcoin domestically, whereas by 2024 they must promote half. The requirement will enhance to 75% by 2025.
Third, below the brand new regulation, miners can solely purchase electrical energy by the nationwide electrical energy public sale system KOREM, which may have a separate miner-focused buying and selling platform. Mainly, the nationwide grid operator will decide the quantity of “extra” electrical energy and public sale it off and miners should win the public sale to purchase electrical energy. The quantity of electrical energy that can be out there at public sale is not going to be enough for all miners in Kazakhstan, who should flip to different sources of electrical energy era.
Fourth, if miners purchase electrical energy by the public sale system or import it from Russia, they have to pay a tax, which units the ground worth for electrical energy at $0.055 per kWh. It is a significantly excessive price, which implies that miners can’t depend on long-term buying energy. The brand new regulation additionally applies a flat tax of $0.022 per kWh on electrical energy from renewable sources.
The longer term is hazy
In response to the report, the brand new regulation may both carry regulatory stability or its strict taxation may kill the business. Nevertheless it stays to be seen what the regulation’s actual influence on minors can be, making the long run unsure.
In the meantime, miners in Kazakhstan must search for new sources of electrical energy, with gasoline, wind and photo voltaic having essentially the most potential, in keeping with the report.
As well as, the instability of the previous 12 months has deterred overseas traders from investing in Kazakhstan, which has decreased the short-term potential of the business. Nonetheless, the report notes that the nation’s mining business holds long-term potential.