The government of Kazakhstan has collected over $7 million in taxes from cryptocurrency mining enterprises in the country this and last year. The news comes amid growing regulatory pressure that is limiting the industry’s access to low-cost energy while increasing its tax burden.
Kazakhstan’s coffers have received 3.07 billion tenge (almost $6.9 million) in tax payments from entities involved in the minting of digital currencies in 2022, the State Revenue Committee of the Ministry of Finance announced, quoted by local media and the crypto news outlet Forklog.
Cryptocurrency miners in the Central Asian nation are required to pay taxes and fees since Jan. 1, last year. In 2023, they have already transferred 240 million tenge (almost $540,000) to the budget, by April 27. All due payments for the first quarter must be made by May 25, the finance ministry reminded.
On Feb. 6, this year, President Kassym-Jomart Tokayev signed the new law “On Digital Assets in the Republic of Kazakhstan,” some provisions of which are yet to come into force. It regulates crypto-related activities, such as mining, and is accompanied by amendments to the tax code. Most notably, the legislation restricts miners’ access to cheap electricity after they were blamed for power shortages.
According to Sergey Putra, Senior Coordinator for Governmental Relations at the National Association of Blockchain and Data Centers Industry in Kazakhstan, the adoption of the law demonstrates Kazakhstan’s interest in the development of the crypto industry in general. At the same time, several problems related to other laws or regulations remain relevant, he noted, commenting for Bitcoin.com News on the effects of the legislative changes for the sector.
Miners in Kazakhstan have been disconnected from local sources of electricity for more than a year, even amid surplus from energy producing companies, Putra elaborated. An additional tax for the consumed electricity excludes the possibility for miners to look for sources of electricity at low rates. The fee is differentiated and increases the cost per kilowatt-hour, explained the representative of the industry organization.
Sergey Putra also pointed out that the law’s implementation through by-laws is extremely difficult and not in the direction of supporting miners and the crypto industry as a whole. He expressed hope that these are temporary issues and that their solution would bring a new period of development for bitcoin mining in the country.
Kazakhstan became a cryptocurrency mining hotspot when China cracked down on the sector in the spring of 2021. Attracting miners with subsidized electricity, it ranked third in terms of average global monthly hashrate in January 2022, as per data provided by the Cambridge Center for Alternative Finance. However, according to Norway-based industry analyst Jaran Mellerud, Kazakhstan’s share has since shrunk from a peak of 18% in October 2021 to just 4% as of May 2023.
Cryptocurrency mining has faced increasing scrutiny and regulation from governments worldwide in recent years. The sector has been criticized for its high energy consumption, environmental impact, and potential to enable illicit activities such as money laundering and tax evasion. Governments have been grappling with how to regulate the industry while balancing the potential benefits it offers, such as innovation and job creation.
In response to these concerns, some countries have taken steps to crack down on mining activities or introduce stricter regulations. For example, China has enforced a widespread ban on mining, citing concerns over energy consumption and financial stability. In the United States, regulators have expressed concerns over the industry and potential regulatory measures.
On the other hand, some countries have embraced cryptocurrency mining and sought to create a regulatory environment conducive to the industry’s growth. For example, countries like Canada and Iceland have attracted mining operations due to their abundant and cheap renewable energy resources.
The situation in Kazakhstan highlights the challenges governments face in balancing the potential benefits and drawbacks of cryptocurrency mining. While the country initially welcomed miners with open arms, it has since faced pressure to address concerns over energy consumption and tax revenue. As the sector continues to evolve worldwide, it remains to be seen how governments will navigate the complex landscape of cryptocurrency mining and regulation.
