Kazakhstan, one of the world’s leading Bitcoin mining hubs, has reported a substantial increase in tax revenue from crypto mining operations. According to local media reports, the Kazakh government collected approximately $7 million (equivalent to 3.07 billion tenges) in tax payments from crypto miners in 2022. This surge in revenue follows the implementation of an amended law aimed at regulating the fiscal burden associated with mining cryptocurrencies.
Preliminary data from the government for 2023 reveals that, as of April 27, mining fees collected amounted to 240 million tenges (approximately $541,000). Although these figures are lower compared to the first quarter of 2022 when fees reached 652 million tenges (~$1.5 million), the tax revenues still indicate a thriving crypto mining industry within the country.
Kazakhstan’s prominence as a Bitcoin mining destination is evident in its significant contribution to the global Bitcoin hash rate. As of January 2022, the Central Asian nation accounted for 13.22% of the total hash rate, closely following the United States (37.84%) and China (21.11%), according to data from the Cambridge Centre for Alternative Finance.
The introduction of taxes on digital mining on January 1, 2022, marked a turning point for Kazakhstan. The tax structure is based on the electricity consumption of mining entities, addressing the concerns of the national power grid’s underutilization by crypto miners. The amended legislation not only provided a legal framework for further adoption but also served as a means to navigate the evolving global regulatory landscape.
During the bullish market of 2021, Kazakhstan witnessed an influx of foreign mining operators, which strained the already complex relationship between the country and miners. An estimated 87,849 mining rigs were brought into the territory by November 2021, following China’s crackdown on mining activities.
Recognizing the need to address tax evasion and unlawful practices, the Kazakh government recently unveiled plans to introduce new crypto regulations. One proposal entails requiring government approval for secured digital assets issuers, while another aims to ensure that miners sell at least 75% of their earned crypto through registered exchanges. These measures are anticipated to mitigate tax evasion and promote a more transparent and accountable crypto-mining industry.
As Kazakhstan continues to navigate the intersection of cryptocurrency and regulation, its success in generating substantial tax revenue from crypto mining serves as a testament to its growing position within the global crypto ecosystem. With ongoing efforts to foster a favorable environment for innovation, Kazakhstan is poised to play a pivotal role in shaping the future of cryptocurrencies.
As of recent, the crypto mining in Kazakhstan in the digital gold rush of 2021 and early 2022 has nearly evaporated. In fact, many of the once great warehouses housing thousands of miners have shuttered or became vacant. Tensions from the Ukraine war and Kazakhstan relying on power from within Russia has scared foreign investment seeking the consistent power supply needed to run a mining operation. Kazakhstan had many of the elements required for mining, cheap, subsidized power and ample real estate in its industrial districts, but geo-political issues seem to have killed the digital gold rush for now.
Written By Agbo Obionnaya
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