Kazakhstan has become one of the world’s top Bitcoin mining hubs, with mining entities contributing 13.22% of the total Bitcoin hash rate as of January 2022. However, the government of Kazakhstan has been concerned about the undertaxed usage of the national power grid by crypto miners. To address this, the government introduced taxes on digital mining on January 1, 2022, based on electricity consumption by mining entities.
Local media reports suggest that the amended law regulating the fiscal burden of mining cryptocurrencies has been successful. The government collected 3.07 billion tenges (approximately $7 million) in tax payments from crypto mining entities in 2022. However, preliminary data for 2023 shows a decrease in mining fees collected, totaling 240 million tenges (over $541,000) by April 27, compared to 652 million tenge (~$1.5 million) in fees paid in the first quarter of 2022.
The drop in fees collected could be due to a wave of foreign mining operators relocating to Kazakhstan during the 2021 bull market. Some estimates suggest that more than 87,849 rigs had been brought to the territory by November 2021 following China’s crackdown on mining activities. This influx of foreign mining operators has impacted the country’s already tricky relations with miners.
To address tax fraud and unlawful business operations, the government has announced plans to introduce new crypto regulations. One proposal calls for government approval for secured digital assets issuers, while another would require miners to sell at least 75% of crypto earned via registered exchanges. This move is expected to reduce tax evasion.
The amended legislation regulating the fiscal burden of mining cryptocurrencies is considered a legal path for further adoption amid tightening regulations worldwide. The government’s efforts to regulate the crypto industry and ensure fair taxation are expected to attract more investors to the country.
Kazakhstan’s position as a top Bitcoin mining hub is likely to continue, given its abundant energy resources and favorable regulatory environment. However, the government’s priority is to ensure that the industry operates within the law and contributes its fair share to the country’s economy. The new crypto regulations are a step in this direction, and their implementation is eagerly awaited by the industry and investors alike.
