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2024
The number of "white" miners in Kazakhstan has halved over the year due to taxes and electricity shortages
The number of legal cryptocurrency miners in Kazakhstan participating in centralized trading in the wholesale electricity market has halved from 2023 to 2024. This became known in early October 2024 from the report of the operator of the electricity and power market in Kazakhstan.
According to Inbusiness.kz, the number of companies wishing to participate in centralized trading has decreased from 12 in 2023 to six in 2024. This is due to tougher regulation of the industry and problems with energy supply.
Miners in Kazakhstan can purchase energy in the wholesale market only within the submitted quota. At the same time, over the past year there was not a single month when digital miners would choose the entire quota provided by the operator. On average, crypto-investors buy out only 29% of the allocated volume.
The founder of the BTC KZ data center, Din-Mohammed Matkenov, said that legal miners are faced with unstable energy supply. They can be completely limited or provided with only 30% of capacity during the day, which makes it difficult to predict profits.
In addition, Kazakhstan introduced a tax on the extraction of cryptocurrencies in the amount of ₸1 for 1 kVt·ch. In February 2024, the authorities proposed raising it to ₸10 in 1 kVt·ch. According to industry representatives, such an increase will make mining in the country unprofitable.
Alan Dordzhiev, head of the National Association of Blockchain and Data Center Industry of Kazakhstan, noted that many companies began to look for other jurisdictions for doing business after problems with Internet communication in January 2022 and the subsequent power outage.
At the end of January 2024, all miners legally registered in Kazakhstan received a notification of the cancellation of electricity supplies by the end of February 2024. This was explained by the "tense situation with maintaining a balance of electricity and capacity."[1]
The Ministry of Digital Development of Kazakhstan approved the requirements for miners. They will have to purchase additional equipment and software
In early July 2024, the Ministry of Digital Development, Innovation and Aerospace Industry of the Republic of Kazakhstan approved new requirements for digital miners, obliging them to purchase additional equipment and software. The corresponding changes were made to the joint order of the Ministry of Digital Development and the Ministry of National Economy of April 2023.
According to "Учет.kz," the updated checklist in the field of digital assets has been supplemented with a clause according to which miners are required to provide documents confirming the presence of an automated system for commercial metering of electricity, special automation of load disconnection and telecommunications systems. These systems shall be unified with the equipment of the system operator and power transmission organization.
The new requirements will come into force on July 15, 2024. They were developed in accordance with the law "On Electric Power Industry," which obliges digital miners to have automated electricity metering systems and special automation.
Earlier, in May 2023, the Ministry of Energy of Kazakhstan also approved a number of requirements for connecting miners to electric networks. According to the order of the Minister of Energy Almasadam Satkaliev, miners must supply electricity to the wholesale market under contracts with energy transmission companies.
To conclude a contract for the supply of electricity, miners must provide nine documents, including a copy of the certificate of state registration, technical conditions for connecting to power grids with a voltage of 35 kV and higher with an authorized capacity of at least 1 MW, as well as an acceptance certificate for a commercial electricity metering system.
According to KEGOC, in 2022, restrictions for miners in terms of capacity amounted to 676 MW, which is equivalent to 4% of the peak capacity of the national power grid. Despite the measures taken, Kazakhstan was forced to import electricity from Russia in the amount of 1,462 MW.[2]
2023: Miners are required to sell 75% of mined cryptocurrencies on country-registered crypto exchanges
In February 2023, Kazakhstan ordered miners to sell 75% of mined cryptocurrencies at crypto exchanges registered in the country. So the authorities want to reduce the possibility of tax evasion by miners.
2022
Cryptocurrency miners ordered to receive licenses
At the end of December 2022, the Parliament of Kazakhstan approved amendments on the regulation of digital mining, which introduce licensing of this activity. The initiative is aimed at increasing the revenues of the country's budget from the extraction of cryptocurrencies.
For miners, two categories of licenses are provided: the first will be received by those who have their own data centers, the second - those who put their equipment in rented from the first cells. Holders of the second category of licenses will not be able to apply for the energy quota.
All miners will have to work through accredited Kazakh mining pools, said deputy Ekaterina Smyshlyaeva, presenting this bill in parliament. According to her, Kazakhstan was used as a "raw material appendage of the blockchain industry." Now miners are obliged to be licensed in the country, that is, to create legal entities and become full-fledged tax entities.
In terms of taxation, as Ekaterina Smyshlyaeva noted, transparent mechanisms for administering the following taxes have been developed:
- corporate income tax of a digital miner. Calculated taking into account the cost of the product at the time of receipt as a reward;
- corporate income tax of the mining pool with the commission received for the services rendered;
- tax on the increase in value for individuals when carrying out operations with cryptocurrency; corporate income tax on crypto exchanges as business entities (crypto exchanges are withdrawn from the AIFC preferential taxation regime in terms of CPN).
Kazakhstan plans, as the head of state Kassym-Jomart Tokayev said in December 2022, to become a leading player in the field of new digital technologies, a crypto-eco system, as well as regulated and transparent digital mining. Digital tenge may become a key element of Kazakhstan's future financial system.
At the same time, earlier in 2022, the President of Kazakhstan instructed to multiply increase taxes on cryptocurrency mining in the republic.[3]
Miners in Kazakhstan must now buy electricity from the general power system in an auction format on a special exchange
In December 2022, the Mazhilis (the lower house of the parliament of Kazakhstan) approved the draft law "On digital assets of the Republic of Kazakhstan" and a package of amendments to existing laws, including tax and administrative codes. The documents introduce new rules for mining cryptocurrencies.
In accordance with the innovations, miners in Kazakhstan must now buy electricity from the general power system in an auction format on a special exchange. At the same time, electricity will power be put up for auction only with its surplus.
 | The procedure for the implementation of the quota was introduced in the event of a surplus of both the energy system as a whole and in the context of territories. Now miners will be able to purchase electricity from the general energy system only if there is a surplus and exclusively through the KOREM exchange [Kazakhstan operator of the electricity and power market - approx. TAdviser]. For this volume, price restrictions have been lifted, and trading will be carried out exclusively according to market mechanisms, - said the deputy of the Mazhilis Yekaterina Smyshlyaeva. |  |
COREM conducts centralized electricity trading. Bidders wishing to buy electricity must submit applications, having previously deposited money with the bank. Bidding is held both with the delivery of goods on the next day, and for a longer period: week, month, quarter or year.
Also, the deputies clarified the list of sources from which miners can consume electricity. We are talking about renewable power, own generation and electricity imports.
In January 2022, the Kazakhstan Electric Grid Management Company cut off the power supply to mining farms. Since then, the restriction has been repeatedly extended. [4]
Criminals force IT specialists to mine cryptocurrencies
In August 2022, the Department for Combating Organized Crime of the Ministry of Internal Affairs, the National Security Committee of Kazakhstan (KNB) and the police during a joint operation in Alma-Ata, Shymkent, Almaty, Aktobe and Zhambyl regions detained a group of people suspected of creating a criminal group.
She forced cryptocurrency mining through threats and blackmail of blockchain specialists. For example, the criminals "put on the counter" a 36-year-old IT specialist who was forced to organize the work of mining farms. The group of "criminally oriented persons" consisted, police say, of 23 former convicts who specialized in knocking out debts.
Every month, cryptocurrency worth from $300,000 to $500,000 per month was mined at underground mining farms located in the Talgar district of Almaty region. During the searches, the police seized pistols, a Kalashnikov assault rifle, cartridges, three sets of forged license plates, black accounting, more than six thousand items of equipment for mining farms totaling about $7 million.
Investigators assure that the detainees were participants in a multi-level scheme, and large cryptocurrency mining operations in Kazakhstan were associated with high-ranking officials and influential businessmen.
Bitcoin mining cost $8762
Miners cut off from power supply due to electrical problems
Since January 24, 2022, miners in Kazakhstan have been disconnected from power supply due to large-scale electricity problems. The corresponding order was sent by the power grid management company Kegoc to 196 organizations throughout the republic.
| | Currently, there is a tense situation with maintaining the balance of electricity and capacity in the UES [unified energy network - approx. TAdviser] of Kazakhstan, the letter says (an excerpt from it is quoted by TASS with reference to the Informburo edition). - In this regard, while maintaining the current situation in the period from January 24 to January 31, 2022 inclusive, the planned supplies of electric energy to [legal] entities engaged in digital mining are completely canceled. | |
Alan Dordzhiev, President of the Association of Blockchain and Data Center Industry in Kazakhstan, said that the cause of power supply problems in the country is not miners, but high wear and tear of the energy infrastructure.
According to him, the country's energy system by the end of January 2022 is on the verge of wear and tear - more than 70% of the stations were launched on average 40 years ago. Electricity prices have always been restrained, and the industry has remained seriously underfunded due to the government holding back electricity prices, and miners have become only an "excuse" for Kegoc and the republic's ministry power engineering specialists , Dordzhiev said.
January 25, 2022 in Kazakhstan, Uzbekistan Kyrgyzstan and there was a massive power outage. To Alma-Ata Traffic lights turned off in, traffic controllers appeared on the streets. In Kyrgyzstan, the capital Bishkek and several other cities and towns were partially left without electricity. In Uzbekistan, the capital Tashkent and several other cities suffered.
Kegoc called the overload of the transit power line in Kazakhstan due to an "emergency imbalance" in the networks of neighboring countries the cause of the interruptions.[5]
USA, Kazakhstan and Russia lead the mining market
In January 2022 Kazakhstan , it ranked third (13%) in terms of the share of the hashrate of the largest in terms of capitalization cryptocurrencies Bitcoin after and. USA China Russia was in 6th place.
2021
Government imposes restrictions on miners
By December 2021, the Bitcoin mining boom in Kazakhstan ended even faster than it began. Miners who flocked to Kazakhstan now see "zero potential."
The country's energy failures have forced the government to take action against the energy-intensive industry it used to welcome with open arms. A quick reversal of events led to the elimination of one of the cheapest places for mining cryptocurrency.
The Ministry of Energy of Kazakhstan amended the existing legislation, allowing the grid company Kegoc to limit or reduce the supply of electricity to miners in the event of a shortage of electricity and in order to avoid emergencies.
"It's like night and day," said Almas Chukin, partner at Visor Kazakhstan: "At the moment, there is no potential for Bitcoin mining in Kazakhstan."
Constant power outages due to crypto miners
At the end of November 2021, it became known that constant power outages began in Kazakhstan due to cryptominers. Mining cryptocurrencies leads to overloading of power systems.
According to the Financial Times, the demand for electricity in Kazakhstan by the end of November 2021 relative to January increased by about 8%. This is a sharp increase in energy consumption compared to the annual growth of 1-2% that is usually observed in the country.
The publication says that more than 87,849 "energy-intensive" cryptocurrency mining installations have been transferred from China to Kazakhstan. According to the University of Cambridge, the country ranks second (after the United States) as one of the most popular places for mining cryptocurrencies.
In October 2021, an increased load on Kazakhstan's power systems led to emergency outages at three power plants in the north-east of the country. In addition, the regions of the republic faced fan power outages during peak hours. In the same month, the Kazakh authorities limited electricity consumption to 100 megawatts to miners.
In June 2021, Kazakhstan signed a contract with the Russian holding Inter RAO for additional electricity supplies from Russia, however, apparently, this agreement by the end of November did not help save the country from overloading energy systems due to cryptocurrency mining.
Serious problems began in early 2021 as the cryptomining business began to be forced out of the country in the neighboring PRC, and then they outlawed it altogether, which led to a massive outflow of miners to more favorable locations for operation, the energy supply in which is designed for such loads. According to the inbusiness.kz portal, by the end of November 2021, some of the miners had already begun to move from Kazakhstan to neighboring Russia.[6]
US, Kazakhstan and Russia lead in bitcoin mining
Russia has increased its share in global bitcoin production from 6.8% in June to 11% in September 2021. The country ranks third in the world, according to data from the University of Cambridge business school. The world leader in bitcoin production is the United States with a share of 35.4%. In second place is Kazakhstan with a share of 18.1% (+ 10 pp compared to June).
The high positions of Kazakhstan and Russia may be associated with the relocation of miners from China.
President of Kazakhstan signed a law on taxation of miners
At the end of June 2021, President of Kazakhstan Kassym-Jomart Tokayev signed a law on taxation of miners. According to the country's authorities, the cryptocurrency mining market should be profitable for the state.
According to the document, from January 1, 2022, an additional payment of 1 tenge (about $0.0023) is introduced for 1 kW/h of electricity consumed when mining bitcoin and other digital currencies. The amount of the fee is calculated by the payers of the board based on the actual amount of electric energy consumed during digital mining and the established rate of the board.
In accordance with the law, the authorized body in the field of information security on a quarterly basis, no later than the 15th day of the second month following the reporting quarter, submits information about payers to the authorized body.
The Minister of Digital Development, Innovation and Aerospace Industry of Kazakhstan Bagdat Mussin believes that the new law on taxation of miners is designed to "bring out of the shadow those miners who are in the gray zone."
The National Association of Blockchain and Industry Data Centers of Kazakhstan told ForkLog that this decision "will very negatively affect the investment attractiveness of the industry."
According to the president of the association, Alan Dordzhiev, miners from China, who consider Kazakhstan as a possible jurisdiction for migration, are also "embarrassed by this initiative."
In May 2021, the Chinese company Bit Mining announced plans to build a data center for the 100 MW mining industry in Kazakhstan in partnership with two local firms. In June, when the Chinese authorities increased pressure on bitcoin mining farms, the company began supplying mining devices there.[7][8]
2020
The largest mining data center in the CIS is being built in Kazakhstan
On August 24, 2020, it became known about the construction in Kazakhstan of the largest data center in the CIS for the extraction of cryptocurrencies. Its capacity will be 180 MW, and in the future the figure will be increased to more than 400 MW. The project is being implemented by Enegix. Read more here.
Kazakhstan decided to attract $738 million in investments in Cretovaluts and Mining
In mid-June 2020, the Minister of Digital Development, Innovation and Aerospace Industry of Kazakhstan Askar Zhumagaliev announced that the country expects to attract 300 billion tenge (about $738 million) of investments for cryptocurrency mining projects. The authorities want to receive such funds from investors within three years.
According to Zhumagaliev, mining farms have already brought investment to Kazakhstan by 82 billion tenge (over $200 million). In the future, this figure will increase significantly. By mid-June 2020, there are only 14 operating mining farms in the country, so the industry has "great potential," the minister said. These farms are located in the northern regions, in Pavlodar, East Kazakhstan regions and Uralsk.
At a meeting of the Senate of the Parliament of Kazakhstan, he stressed that the government has studied the experience of other countries in the field of mining and cryptocurrencies - the United States, Sweden and South Korea. Zhumagaliev believes that activities such as mining become part of everyday life.
In June 2020, the deputies discussed a bill that categorically prohibits the issuance and circulation of unsecured crypto assets, with one key exception: "unless otherwise provided by law." The project, which was discussed in parliament, does not prohibit crypto mining, since it does not consider it as an entrepreneurial activity.
The new bill regulating digital technologies in Kazakhstan actually legalizes the extraction of cryptocurrencies and assigns to miners the ownership of "mined" digital assets.
Earlier, the government and parliament of Kazakhstan agreed not to introduce taxation on miners. However, the fee is planned to be introduced for those token holders who exchange them for fiat money.[9]
Notes
- ↑ The number of "white" miners in Kazakhstan has halved
- ↑ Digital Miners checklist updated with new requirement
- ↑ Parliament of Kazakhstan adopted amendments on licensing digital mining
- ↑ [https ://kz.kursiv.media/2022-12-07/mazhilis-prinyal-zakonoproekty-o-majninge-dobavil-trebovanie-o-pokupke-elektroenergii-cherez-birzhu/Majilis passed mining bills, added a requirement to buy electricity through the exchange Подробнее на Kursiv Media: https://kz.kursiv.media/2022-12-07/mazhilis-prinyal-zakonoproekty-o-majninge-dobavil-trebovanie-o-pokupke-elektroenergii-cherez-birzhu/]
- ↑ Miners in Kazakhstan have been disconnected from the power grid since January 24 due to the situation in the energy sector
- ↑ Crypto miners in Kazakhstan face bitter winter of power cuts
- ↑ The President of Kazakhstan signed a law on the introduction of additional fees for mining
- ↑ The President of Kazakhstan signed a law on the taxation of miners
- ↑ Kazakhstan Plans to Attract $738 Million of Cryptocurrency Investment in Next Three Years
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