The President of the Republic of Kazakhstan, Kassym-Jomart Tokayev, signed on the eve of amendments to the code of tax and budget payments, introducing a new tax for cryptocurrency miners in the country.
In particular, the amendments introduce a fee in the amount of 1 Kazakhstani tenge or the equivalent of 0.0023 US dollars per kilowatt-hour of electricity used. The amendments will enter into force on January 1, 2022. Let’s talk about the situation in more detail and its role for the cryptocurrency industry.
By tradition, let’s start with an explanation of what is happening. Kazakhstan has become the focus of attention of the cryptocurrency community after the Chinese authorities decided to create big problems for Bitcoin miners. In fact, in some areas of the country, which were popular among owners of computing equipment due to the available electricity, the mining of coins was completely prohibited. As a result, miners were forced to look for a new place to install their own devices.
At the same time, Chinese officials also have a reason for such actions. According to analysts, in this way they want to scare away inexperienced investors from Bitcoin and other coins who are contemplating a connection with the cryptocurrency industry due to its active growth in early 2021. Well, this is needed to popularize the so-called CBDC – the national digital currency, which will become the modern version of the yuan.
The consequences of the decrees of Chinese officials have been felt by the entire cryptocurrency industry. In particular, blocks in the Bitcoin network over the past few weeks have been slower than ever, which has created inconvenience for cryptocurrency users. In addition, on Saturday, there was the largest drop in BTC mining difficulty, which affects the rate of Bitcoin emission – that is, the release of new coins.
Mining difficulty collapse is equivalent to 27.94 percent.
The drop in the hashrate or total processing power of the BTC network means that many Chinese miners have already disconnected from the network and started relocating. One of the most popular destinations for relocation is Kazakhstan due to affordable electricity prices. Although now the situation in the country may change.
Cryptocurrency mining in Kazakhstan
The author of the amendments is the head of the Committee for Economic Reform and Regional Development Albert Rau. Earlier, he said that the payment for electricity for mining companies will not only put their activities in the field of law, but also allow to limit “uncontrolled consumption of electricity.”
The tariff hike was met with criticism from the crypto community. The National Organization for Blockchain and Data Center Industry of Kazakhstan even called a press conference at which the president of the association, Alan Dordzhiev, noted that miners are already struggling to break even, Decrypt reported.
Accordingly, the new amendments will scare away investors from the country and will only become an additional problem for owners of computing equipment.
The bill was signed by the presidents during the influx of miners from China, who were forced to move to Kazakhstan due to pressure from the local government.
The country itself has become one of the most popular relocation destinations due to its relatively low electricity rates. It seems that now this advantage will be leveled, or at least reduced.
Experts agreed that the government’s decision will lead to negative consequences in the long term. The mining industry is actively developing around the world, and large companies may well choose a different region for their crypto farms. In this case, Kazakhstan will only lose potential business, which could become a source of income for the budget.
We believe that many miners will be forced to agree to the new working conditions in Kazakhstan, since they will clearly not be able to return the equipment to China. Accordingly, the country’s budget is likely to receive additional revenues from fans of cryptocurrency mining, and criticism of the decision will not end with anything. Be that as it may, the hashrate of the BTC network will sooner or later return to its former heights, since now it is still profitable to mine cryptocurrencies.