In a significant development within the cryptocurrency mining sector, eight prominent mining operators based in Kazakhstan have issued an open letter addressed to President Kassym-Jomart Tokayev. In this communication, they express deep concerns over the escalating energy costs severely impacting their mining operations. This development comes as Kazakhstan grapples with its position as the global third-largest Bitcoin mining hash rate market.
The open letter, bearing the signatures of major entities, including BCD Company, TT TECH Limited, KZ Systems, AI Solutions, Green Power Solution, VerCom, and Kinur Invest, paints a somber picture of the local cryptocurrency mining landscape. It underscores that the industry is currently facing a “very distressful situation” due to the steep energy prices imposed on miners.
As a direct consequence of these high energy expenses, all significant players within the cryptocurrency mining sector have halted their operations and are contemplating a complete withdrawal from the Republic of Kazakhstan by the end of the year. This precarious situation not only jeopardizes the livelihoods of numerous miners but also poses a significant challenge to the government’s efforts to regulate the broader cryptocurrency industry, with a particular focus on mining.
According to the open letter, the heart of the issue lies in the decision to levy taxes on energy consumption by cryptocurrency miners, a measure introduced on January 1, 2022. This move was prompted by national concerns about cryptocurrency miners’ previously undertaxed use of the national power grid.
Interestingly, even with the new tax framework in place, the cost of one kilowatt-hour (kWh) of taxed electricity in Kazakhstan remains substantially lower, at approximately $0.067, when compared to the pre-tax average of $0.12 per kWh in the United States. In 2022, the Kazakh government reportedly collected around 3.07 billion tenges ($7 million) in tax revenue from cryptocurrency mining entities.
Nevertheless, despite this injection of funds into the state’s finances, the open letter strongly asserts that Kazakhstan has already lost its position among cryptocurrency mining powerhouses such as the United States, Russia, and China. Moreover, it warns that the industry in Kazakhstan is teetering on the edge of extinction. Mining executives contend that swift intervention from the government is imperative to ensure the survival of the digital mining sector in Kazakhstan.