Government of Uzbekistan Triples Tax on Electricity for Crypto Miners

The provision follows an Aug. 22, 2019 decree from President Shavkat Mirziyoyev entitled “On Accelerated Measures to Improve Energy Efficiency of Economic Sectors and the Social Sphere, Implement Energy Saving Technologies and Develop Renewable Energy Sources” and to further motivate the rational use of electrical energy by consumers.

The government of the Republic of Uzbekistan has ordered a 300% increase on electricity tariffs for cryptocurrency miners.

According to a Sept. 27 announcement, the Cabinet of Ministers of the Republic of Uzbekistan has decreed that cryptocurrency miners must pay three times more the existing electricity tariffs.

Uzbekistan’s approach to crypto and blockchain

Last September, Mirziyoyev ordered the establishment of a state blockchain development fund called the “Digital Trust.” The fund’s primary goal is to integrate blockchain into various government projects, including healthcare, education and cultural areas. The organization is set to be responsible for international investment in the Uzbek digital economy.

Earlier the same month, a decree legalizing crypto trading – also making it tax-free – and mining in the country came into force. According to the law, foreign nationals can only trade cryptocurrencies in Uzbekistan by creating a subsidiary in the country.

The law also specifies a minimum capital requirement of roughly $710,000 to establish a crypto exchange. Furthermore, crypto traders will not fall under Uzbek stock market regulations and will be relieved of their obligation to pay taxes on trading revenues.

Mining regulation in other countries

In June, the Iranian government announced that they would cut power to crypto mining operations until new energy prices were approved. Iran’s Ministry of Energy reportedly revealed that the country had seen a 7% spike of electricity consumption over a monthly period ending on June 21, 2019. The Ministry believes that the surge was caused by the growing number of crypto mining activities in the country.

China’s Bitcoin mining scene is a major player in the global hash rate, with China-based mining pools reportedly mining potentially 70% of all the coins created yearly. However, in April, the Chinese government said that it was considering the elimination of crypto mining in the country.

GSR and Interhash to Create Hedging Solutions for Bitcoin Miners

Liquidity service provider and digital asset market maker, GSR, announced a partnership with Interhash, the mining services company and strategic partner of mining rig manufacturer, Canaan, in an updated press release, Dec. 20. The partnership aims to provide risk management solutions for Bitcoin miners on Canaan’s network, allowing them to protect against losses and earn yield on inventory.

Risk management solutions for a volatile industry

GSR will offer a customized suite of products consisting of swaps, collars, and more bespoke structured instruments from January 2020. These will provide a hedge against volatile factors such as Bitcoin price, mining difficulty, electricity and equipment costs. GSR Co-Founder, Cristian Gil explained:

“The cryptocurrency industry is more volatile than any other business area, and many participants in the ecosystem are under-hedged or outright un-hedged against adverse price action. Miners are a foundational component of the digital asset space, and have to consider many volatile factors when planning their future revenue streams.”

Hedging to become more important as the industry matures

In traditional markets, the majority of corporate players have hedging programs. With $3 billion set to be mined in 2020 at current prices, the hedging market is small compared to physical commodities markets.

However, as portfolio sizes increase and capital expenditure grows, it makes sense to consider hedging options as resources become available. Global Marketing Director of Interhash, Cora Jiang, added:

“We believe risk management will play an integral role in this industry as it matures. We are proud to partner with GSR who have substantial financial expertise in this area and a proven track record in crypto finance.”

As Cointelegraph reported, mining rig manufacturer, Canaan’s shares have dropped 40% since its November IPO.

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