Once the world’s second-biggest safe haven for crypto miners, Kazakhstan has seen rapid changes in regulations since the beginning of this year. The nature of most of these changes is largely restrictive, which has reduced its crypto mining earnings in 2022.
The country’s state revenue committee released a report on Monday detailing the total energy fees local crypto miners have paid in the first quarter of this year.
The government started to impose a tax of one Tenge per kilowatt-hour on registered crypto minors. According to the committee released report, the government has added 652 million Tenge ($1.5 million) as energy fees to the crypto mining budget for Q1 2022.
The Rise of Mining in Kazakhstan
The current mining conditions of the country are strict. Before, Kazakhstan was one of the biggest supports of crypto miners. The President of this energy-rich country addressed the nation in 2020. In his address, he encouraged the citizens to attract $1.2 billion worth of crypto infrastructure by 2025.
The initial lack of regulation and cheap electricity attracted many miners who then decided to setup up shop in Kazakhstan, making it one of the biggest countries by BTC hash rate distribution.
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In part, this rise was also due to China’s ban on cryptocurrency, which led many Chinese miners to flee to countries like Kazakhstan and USA.
However, energy concerns soon took centre stage – compelling the country to introduce strict regulatory measures.
The Introduction of Regulatory measures in Crypto
Things toon started to take a turn for the worse later. Power blackouts became common and frequent, and the energy demands jumped by 1.5 Gigawatts. And since Bitcoin was always seen as an energy-guzzling technology, the ministry of energy wasted no time blaming miners for the sudden increase in demand.
Energy concerns led to the introduction of an energy tax on miners. While currently, it remains steady at one Tenge, some ministers are pushing for a 1000% tax increase.
In May 2022, the government took another step to add more regulations to the country’s mining ecosystem by introducing a crypto-miner registry. It requires all the miners to provide the following details:
- Business registration data
- Personal ID details
- Power plan details
- Investment details
- Mining location
- Documents showing that they’ve obtained the equipment legally
- Proof that the one who checked whether the applicant meets the technical requirements is a resident of Kazakh.
New miners must provide the above information one month before starting operations. Existing miners have to give those details quarterly.
It is just the start of the regulatory woes as the government claims that it is yet to receive much of the fees because it had to shut down many crypto mining operations.
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Points to note about the current energy tax
Kazakhstan’s government is set to introduce a new crypto bill. One of its major agendas is to increase the local fees for cryptocurrency mining.
Another issue is tax reporting. The current Kazakhstan tax code doesn’t include any point related to digital mining-related payments. The Kazakhstan parliament has passed a law to introduce changes to the code to tie the crypto mining tax with the costs of electricity used by mining operations.
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