Kazakhstan, the world’s third-largest Bitcoin mining hub in terms of hash rate, is facing a crisis in its crypto mining industry due to soaring energy costs.
This predicament has prompted eight prominent cryptocurrency mining firms, including BCD Company, TT TECH Limited, KZ Systems, AI Solutions, Green Power Solution, VerCom, and Kinur Invest, to compose an open letter addressed to President Kassym-Jomart Tokayev.
In their letter, these mining industry leaders highlight the severe distress faced by the Kazakh crypto mining sector due to exorbitant energy prices.
They reveal that all major players within the industry have already suspended their operations and are contemplating a complete withdrawal from Kazakhstan by year-end if the situation remains unchanged.
The executives express concerns that these high energy prices hinder the government’s efforts to regulate the broader cryptocurrency industry, particularly mining.
They attribute the problem to the government’s decision to impose taxes on energy consumption by crypto miners.
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This decision has led Kazakhstan to lose its competitive edge among crypto mining giants such as the United States, Russia, and China, pushing the industry to the brink of extinction.
The letter underscores the urgent need for government intervention, warning that without swift action, the digital mining industry in Kazakhstan will vanish.
The taxation regime for digital mining was introduced on January 1, 2022, primarily targeting the electricity usage of mining entities.
Even at the highest tax rate, one kilowatt-hour of electricity in Kazakhstan costs miners approximately $0.067, significantly lower than the average of $0.12 per kWh in the United States.
According to government data, Kazakhstan collected approximately 3.07 billion tenges ($7 million) in tax revenues from crypto mining entities in 2022.
However, this revenue has come at the cost of pushing the industry to the brink of collapse.
In conclusion, Kazakhstan’s crypto mining industry, a global leader in hash rate, is teetering on the edge due to skyrocketing energy prices driven by tax policies.
Urgent government intervention is needed to ensure the survival of this vital sector, which has been a significant contributor to the country’s economy.
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