Eight leading Kazakh crypto miners have penned an open letter to President Kassym-Jomart Tokayev of Kazakhstan, the global epicenter of Bitcoin mining hash rate. The plea comes amid rising concerns about the exorbitant energy prices faced by the local crypto-mining community.
Notably, this has placed the nation as the third-largest market for Bitcoin mining and on the precipice of an industry collapse.
Crypto Miners Speak Out
The signatories of the letter represent key players such as BCD Company, TT TECH Limited, KZ Systems, AI Solutions, Green Power Solution, VerCom, and Kinur Invest according to local report. They have laid bare the dire circumstances in which the Kazakh crypto-mining industry finds itself. The letter asserts that the sector is in a “very distressful situation.” This is due to the prohibitive energy costs imposed on miners.
A startling revelation in the letter indicates that major industry players have already halted their operations. Additionally, some of them intend to cease all business activities in the Republic of Kazakhstan by the year’s end. The executives further expressed their belief that the government’s attempt to regulate the crypto industry, especially mining, is hampered by the prevailing energy price crisis.
The heart of the matter lies in the decision to increase taxes on energy for crypto miners. This will push Kazakhstan out of the league of crypto mining giants like the United States, Russia, and China.
The Toll of Taxation on Energy
The letter pinpoints the root cause of the industry’s demise. It attributed it to the decision to raise taxes on energy for crypto miners. The signatories argue that this move has eroded the nation’s competitive standing in the global crypto mining landscape. Also, it has brought the industry to the brink of extinction.
The urgency of the matter is emphasized as the letter warns,“If the government does not take urgent measures, the digital mining industry in the Republic of Kazakhstan will cease to exist.”
A Closer Look at Regulatory Shifts
Notably, the taxation storm hit Kazakhstan on January 1, 2022. This was with the introduction of taxes on digital mining based on electricity consumption. This regulatory shift was prompted by mounting frustration within the nation regarding the perceived undertaxed usage of the national power grid by crypto miners.
Despite the taxation, the cost of one kilowatt-hour (kWh) of electricity for miners in Kazakhstan stands at $0.067. This is significantly lower than the average of $0.12 per kWh in the United States before any taxes.
Implications for the Future
Data from the Kazakh government reveals that it received approximately 3.07 billion tenges ($7 million) in tax payments from crypto mining entities in 2022. However, the pressing question remains whether these revenues can offset the potential fallout of the crypto mining industry. This has also raised concerns about the nation’s standing in the global crypto landscape.