Electricity shortages have been dogging Kazakhstan’s booming crypto mining industry this year. A media report reveals that some miners, including some of those that moved in amid China’s crackdown on the sector, are now looking to relocate to destinations with a more stable energy supply like the United States.
Miners Shut Down Crypto Farms Due to Kazakhstan’s Issues With Power Generation
Since China’s May government attack on bitcoin miners, Kazakhstan has been a hot spot for crypto mining. It has high-quality fossil fuel production and maintains low electricity prices. A neglected infrastructure and inadequate generation capacity have made it difficult to supply the electricity required to power energy-hungry minting machines.
Authorities have blamed the growing deficit — consumption surged by 7% in the first three quarters of the year — on the mushrooming mining data centers, and lawmakers have proposed introducing higher electricity tariffs for miners. Industry representatives have voiced their disapproval at the unfair treatment. “They made mining a scapegoat,” Didar Bekbauov, founder of the local mining hosting company Xive, stated on social media earlier in December.
Nikkei Asia stated in a report that the comment was made by an executive on Twitter. This was after Xive had to close down its main plant in Southern Kazakhstan due to a sudden cut in power supplies. While the company still operates another mine farm in the country, it is also exploring the possibility of transferring some operations to the U.S.
In November, the Data Center Industry and Blockchain Association of Kazakhstan reached an agreement with the country’s grid operator, KEGOC, to ensure uninterrupted power supplies to registered miners. The state-run utility did not fulfill its end of the agreement and mining companies started closing down operations in Kazakhstan. Bitmain-backed Bitfufu has also closed its crypto farms in Kazakhstan, and it is moving to the United States.
Although restrictions have been placed on crypto-mining businesses that are regulated, the small-scale shadow economy crypto farms have managed to continue minting digital currency in their basements and garages despite the limitations. The “gray miners” are burning serious amounts of electrical energy and posing another challenge for the government in Nur-Sultan. “Unfortunately it’s very hard to get rid of them,” Alan Dorjiyev, president of the crypto industry association, told Nikkei.
Kazakhstan initially welcomed crypto miners, and then took measures to regulate it through legislation. According to October estimates, crypto mining could bring in $1.5 billion in economic growth and tax revenues of over $300 million. In January 2022, a new tax will be implemented of $0.0023 per kilowatt hour of electricity that registered cryptomining companies use. In January 2022, Kazakhstan will impose a new tax of $0.0023 per kilowatt-hour of electricity used by registered crypto mining companies. This is in addition to plans to construct power plants that have a combined capacity of 3,000 megawatts. It is also considering the use nuclear energy.
Are you positive Kazakhstan can solve its power supply issues and generate enough electricity to support its crypto-mining industry? Leave your comments below.
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