Kazakhstan, the ninth-largest country in the world, is fast becoming a hub for cryptocurrency mining. This is largely due to its abundant and cheap sources of energy – which makes it an attractive location for miners looking to reduce their operational costs. To take advantage of this trend, the Kazakh government has begun regulating the crypto mining industry, and in 2022, it collected $7M in taxes from cryptocurrency miners.
The country’s treasury department confirmed in a statement that it had earned $7 million in revenues from crypto mining taxes in 2022. This figure is significant, especially considering that Kazakhstan only imposed a crypto mining tax in 2021. Prior to that, miners in the country were essentially operating tax-free since there were no regulations governing the industry. The government’s move to collect taxes on cryptocurrency mining is a sure sign that it recognizes the value of the industry and the potential revenues it can generate.
The introduction of taxes on cryptocurrency mining is part of Kazakhstan’s broader efforts to regulate the industry. In September 2022, the country’s president, Kassym-Jomart Tokayev, signed a law regulating cryptocurrency mining that came into effect in January 2022. The law requires cryptocurrency miners to register with the government, obtain an operating license, and pay taxes on their profits.
The introduction of regulations for cryptocurrency mining in Kazakhstan is a significant milestone for the industry. It provides a level of legitimacy to the industry that was lacking before, making it a more attractive destination for overseas investors and companies looking to set up mining operations. The new regulations also benefit the government, as they provide a new source of revenue that can be used to fund economic development projects, social programs, and infrastructure investments.
Kazakhstan’s rise as a cryptocurrency mining hub is driven by several factors. Firstly, the country is one of the world’s top producers of uranium, which it also exports to foreign markets. Uranium is an essential component of the nuclear power industry, making it a critical source of energy for cryptocurrency mining. Secondly, the country has abundant sources of renewable energy, such as solar and wind power, which it can use to power cryptocurrency mining operations. Lastly, Kazakhstan has a low cost of living, which means that salaries and other operational expenses are relatively cheap.
One of the prominent companies investing in cryptocurrency mining in Kazakhstan is Bitmain. Bitmain is a China-based company, which is one of the world’s largest producers of cryptocurrency mining equipment. They began operations in Kazakhstan in 2022 and currently operate a large-scale mining facility in the country. This company’s move to Kazakhstan is a significant win for the Kazakh government, as it attracts foreign investment and generates high-paying jobs in the country.
Another company investing in cryptocurrency mining in Kazakhstan is Enegix. This company is building one of the largest solar-powered cryptocurrency mining facilities in the world. The project is estimated to cost $1 billion and will have a capacity of 180MW. Enegix’s move to Kazakhstan reinforces the country’s position as a cryptocurrency mining hub, and it also shows the potential of renewable energy in cryptocurrency mining operations.
Kazakhstan’s crypto mining industry is still in its early stages, but it has significant potential for growth. The country’s cheap sources of energy, favorable regulations, and low cost of living make it an attractive destination for cryptocurrency miners and investors. The government’s move to collect taxes on the industry is a significant step towards legitimizing it and providing a new source of revenue for the country. As more companies invest in cryptocurrency mining in Kazakhstan, the industry could potentially create thousands of jobs and generate billions of dollars in revenue for the country in the years to come.
Kazakhstan’s government has received approximately $7 million in tax payments from crypto-mining entities as of 2022, following the implementation of an amended law regulating the fiscal burden of mining cryptocurrencies. The legislation, which took effect on January 1, requires mining entities to pay taxes based on their electricity consumption. The move came amid growing national frustration with the undertaxed usage of the national power grid by crypto miners.
Preliminary data from the government for 2023 shows that mining fees collected by April 27 totaled 240 million tenge ($541,000 at the time of writing). The figures are lower than the 652 million tenge ($1.5 million) in fees paid in the first quarter of 2022, likely due to new regulations introduced by the government.
Kazakhstan currently ranks among the world’s top Bitcoin mining hubs. As of January 2022, the Central Asian country contributed to 13.22% of the total Bitcoin hash rate, ranking behind the United States (37.84%) and China (21.11%). The country has become a popular destination for foreign mining operators, with many relocating there during the last bull market, following China’s crackdown on mining activities. By November 2021, more than 87,849 rigs had been brought to the territory.
Recently, the government announced plans to introduce new crypto regulations to curb tax fraud and unlawful business operations. One proposal calls for a government approval for secured digital assets issuers, while another would require miners to sell at least 75% of crypto earned via registered exchanges. The move is expected to reduce tax evasion.
In conclusion, Kazakhstan’s government has taken steps to regulate the crypto-mining industry and ensure that it contributes its fair share to the national economy. The taxation of mining entities based on electricity consumption is a significant step towards achieving this goal. With plans for further regulations, Kazakhstan is positioning itself as a destination for legitimate, regulated crypto-mining activities.
