The government of Kazakhstan is considering a 3D proposal designed to make crypto miners pay significantly more to work in the country, which could make Kazakhstan less attractive to industry.
On February 4, Kazakhstan’s first Deputy Finance Minister Marat Sultan Gaziyev proposed raising prices from $ 0.0023 per kilowatt hour to $ 0.01 (an increase of about 335%) especially for cryptocurrency miners. He also proposed imposing a tax on each graphics card (GPU) and all equipment needed for cryptocurrency mining. He compared the tax card for each video to how casinos are taxed for each table they turn, whether the table is active or not.
The third part of his proposal was to remove mining equipment from exemption from VAT.
Bitcoin mining requires the use of special hardware to perform the necessary calculations to create new blocks on the blockchain. Major mining operations involve more than 10,000 miners, including ASICs (application-specific integrated circuits), GPUs, racks, cooling units, and related objects.
Until political instability forced the government to restrict internet access last month, Kazakhstan became one of the best destinations for crypto miners after China banned mining last summer. Around January 5, the hash rate of the Bitcoin network fell by 13.4% per day from about 205 exahash per second (EH / s) to 177 EH / s due to a short power outage in Kazakhstan.
BIT Mining, a large bitcoin mining company that moved from China to Kazakhstan in July last year, said in January that political instability would not force it to relocate elsewhere. However, this was before the proposal to increase capacity and fees.
The cheap electricity costs and proximity to China have forced miners to flee from Chinese authorities in the midst of the country’s repression. As a result, Kazakhstan has become the second largest producer of bitcoin hash power after the United States, generating approximately 18% of the network’s hash power in August 2021, according to the University of Cambridge. It may be undesirable for new and existing miners to call it their operating base if blocking tax proposals come into force.
It should also be noted that Kazakhstan has had problems with the power supply since the end of last year, at about the same time as cryptocurrencies flowed in from China. Until 2021, the country has seen an increase in domestic electricity consumption of 8%, which has led the government to consider building a nuclear power plant to reduce the load on the power grid and reduce energy costs.
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Affordable electricity seems to be the most important single factor that attracts miners. The Cointelegraph reported on January 27 that the United States could not supply the cheapest electricity and therefore “could not hold the title of master of mining for long.” Depriving Kazakh miners of this benefit could jeopardize the country’s ambitions of $ 1.5 billion from miners over the next five years.