In a significant development, eight leading cryptocurrency mining companies in Kazakhstan have submitted an open letter to President Kassym-Jomart Tokayev, expressing their deep concern over the escalating energy prices in the country. The signatories include prominent industry players such as BCD Company, TT TECH Limited, KZ Systems, AI Solutions, Green Power Solution Ltd., VerCom, and KINUR INVEST.
In the letter, the mining operators describe the industry as being in a “very distressful situation” and warn that, unless the government acts promptly, the digital mining sector in Kazakhstan could face extinction. According to the concerned executives, the entire industry has hit a roadblock, with most major players either suspending their operations or planning to shut down by year’s end.
The core issue highlighted in the letter is the dramatic increase in energy costs for cryptocurrency mining activities. The executives argue that the government’s previous decision to impose additional taxes on energy consumption for digital mining has had severe repercussions. This move, they say, has undermined Kazakhstan’s competitive edge in the crypto mining sector, causing it to lose ground to other global leaders like the United States, Russia, and China.
The call for urgent action comes in the backdrop of a new law, implemented on January 1, 2022, that levies taxes based on electricity consumption by cryptocurrency mining entities. This law was introduced amid a growing sense of discontent among the Kazakh populace over the relatively low taxes paid by crypto miners for using the country’s national power grid. Interestingly, even after the tax imposition, the cost per kilowatt-hour (kWh) in Kazakhstan stands at approximately $0.067, which is still considerably lower than the pre-tax average of $0.12 per kWh in the United States.
However, the letter emphasizes that the current taxed rate, while lower than international standards, is still proving to be detrimental to the domestic crypto mining industry. According to official figures, the Kazakh government has received only about $7 million (or 3.07 billion tenges) in tax revenue from the crypto mining sector in 2022.
The letter concludes with a dire warning: if the Kazakh government does not intervene soon, the country risks not only losing a burgeoning industry but also the potential benefits it brings, such as employment and technological advancement. The signatories urge President Tokayev to reconsider the energy taxation policies for crypto miners and to take immediate steps to mitigate the crisis, thereby aligning the nation’s crypto regulations with its broader economic goals.
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