In a significant development in the cryptocurrency mining industry, eight leading mining operators in Kazakhstan have penned an open letter to President Kassym-Jomart Tokayev, expressing their deep concerns regarding the soaring energy costs crippling their operations. This move comes as Kazakhstan grapples with its status as the world’s third-largest Bitcoin mining hash rate market.
The letter, signed by prominent entities such as BCD Company, TT TECH Limited, KZ Systems, AI Solutions, Green Power Solution, VerCom, and Kinur Invest, paints a grim picture of the local crypto mining landscape. It highlights that the industry is currently in a “very distressful situation” due to the exorbitant energy prices imposed on miners.
As a direct consequence of these high energy costs, all major players in the industry have suspended their activities and are planning to cease their operations entirely in the Republic of Kazakhstan by the year’s end. This precarious situation not only jeopardizes the livelihoods of countless miners but also derails the government’s efforts to regulate the broader crypto industry, particularly mining.
According to the letter, the core of the problem lies in the decision to impose taxes on energy consumption by crypto miners, a measure introduced on January 1, 2022. This move was driven by national frustration with crypto miners’ previously undertaxed usage of the national power grid.
Interestingly, even with the new tax regime, the cost of 1 kilowatt-hour (kWh) of taxed electricity in Kazakhstan remains significantly lower, at approximately $0.067, 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 payments from crypto-mining entities.
However, despite this injection of funds into the state’s coffers, the letter firmly asserts that the country has already lost its standing among crypto mining giants like the United States, Russia, and China, and the industry is on the brink of extinction. The mining executives contend that with urgent intervention from the government, the digital mining sector in Kazakhstan will continue to exist.
