NUR-SULTAN
Kazakhstan is planning to change regulations governing cryptocurrency mining to stamp out illegal operations, tackle a steep rise in electricity consumption and avoid the errors that led to the entire industry being evicted from China.
The Minister for National Economy, Alibek Kuantyrov, presented plans this week to raise taxes for crypto miners from 1 tenge per kilowatt-hour of power consumption to 10 tenge. He also proposed that crypto miners pay their electricity bills according to a system of tariffs higher than domestic consumers.
The government is undertaking to eliminate “grey mining,” operations that are not properly registered and licensed.
The Minister of Digital Development, Innovation and Aerospace Industry, Bagdat Musin called grey mining tax evasion and claimed that grey miners would have their IP addresses blocked and their property confiscated.
Musin said the government was drafting a system of electricity quotas with separate tariffs “which will enable us to set up a transparent process for both market players and the country as a whole.”
“It is important to take due account of risks and the competitivity of our market and ensure our country remains of interest for those players in order to avoid any repeat of the Chinese experience.”
Musin suggested introducing licencing for mining companies which would be granted on approval of compliance with technical requirements, the necessary equipment and health and safety regulations at their premises.
Kazakhstan’s First Deputy Minister of Finance, Marat Sultangaziyev, proposed earlier in February that a tax be levied on every GPU card and piece of equipment required for the mining of cryptocurrency. He also proposed removing exemptions on VAT for most crypto mining hardware.
Setting terms and conditions
The Ministry of Energy has begun to work on creating contracts with terms and conditions for miners as well as carrying out audits on their accounts. They have suggested creating quotas for energy consumption by April 20th. The Ministry of Energy is keen for digital miners to purchase energy at centralised auctions above the selling price and wants miners to move towards obtaining energy from renewable sources.
This flurry of regulations and new rules for the industry comes after President Kassym-Jomart Tokayev last week ordered authorities to identify all cryptocurrency mining enterprises and increase the electricity surcharge they are required to pay. The president tasked the Financial Monitoring Agency to identify all mining firms and to check their tax and customs records by May 2021.
Twenty percent of the world’s cryptocurrency mining takes place in Kazakhstan due to the abundance of cheap electricity which powers the computers needed to unlock the complex numerical puzzles that must be solved to create the currency and complete transactions.
Kazakhstan’s power grid has been strained by the influx of crypto mining firms from China after authorities in Beijing declared the industry illegal in May 2021.
Strains on the power grid culminated in a nearly day-long blackout on 25th January which affected southern Kazakhstan, Kyrgyzstan, and Uzbekistan. Kazakhstan’s state electricity provider KEGOC ordered a cut in power supplies to miners until the end of the month.
Alan Dorjiyev, president of the National Association of Blockchain and Data Centres Industry in Kazakhstan, says the government was wrong to blame the miners for the blackout.
“Every time there is a problem in the country’s power grid, KEGOC points their finger at the miners,” Dorjiyev said. “Now they have an alibi.”