A recent statement from the government of Kazakhstan has announced that the nation intends to raise taxes for cryptocurrency miners within its borders. While the new changes have not yet been decided, the announcement included the potential for any future tax to be linked directly to crypto prices. Such a tax could be a major burden on crypto miners in Kazakhstan, who have already faced numerous challenges over the past year.
Government Taking on a Stricter Tax Stance Towards Miners
Recent months have seen increased scrutiny towards crypto mining operations in Kazakhstan. President Kassym-Jomart Tokayev ordered the government to move forward with significant tax increases for mining in February, ultimately leading to the taxes that are now being discussed. Along with a new tax scheme, the president ordered the financial watchdog for Kazakhstan to being cataloging mining facilities and verifying documentation.
The latest tax announcement comes following action by the authorities against a number of mining operations allegedly committing tax fraud. They supposedly inaccurately listed the category of their businesses to take advantage of tax cuts meant to go to companies carrying out innovative development.
The most recent investigation revealed five mining operations that received over $18 million in tax deductions. However, the mining companies seem to be avoiding any serious consequences due to a lack of clear regulation surrounding these elements of the tax code. Officials have stated that they are currently working to amend the tax code to remedy this issue immediately.
There is also the issue of various get-rich-quick schemes like “Quantum AI” that keep trying to present themselves as legitimate mining operations. When we searched for Quantum AI review it became apparent that this was most likely very far from the truth.
Mining Operations Shutdowns Escalate in 2022
Any new taxes would come at a time when Kazakhstan miners are already struggling under severe government interference. 2022 has already seen many operations shut down permanently as the government continues to carry out inspections of mining companies across the country.
While there are regular government claims that a significant number of mining operations are operating illegally, most of those that have been shut down appear to be legitimate businesses. They include a number of companies associated with some of the country’s most well-known and trusted entrepreneurs and investors. More than 100 mining operations have been shut down so far.
The crackdown on mining has negatively affected many legitimate businesses, but the government has also found many examples of miners operating illegally. Recent shutdowns include over 50 illegal mining farms that have been connected to the power grid without authorization. They do so to avoid the appropriate taxes and often operate in areas that aren’t zoned to allow crypto mining.
Overall these efforts have led to the seizure of 67,000 individual mining equipment units. It’s estimated that closing these crypto farms reduced energy demand by 600 MWh. The government may hope to resolve the issue of energy shortages before the increased demand of winter, and action against miners could escalate if they can’t meet this goal.
China’s Ban Saw Kazakhstan’s Mining Industry Boom
The actions that the government has taken against miners in Kazakhstan stem from issues surrounding electricity shortages in the country. Crypto mining is an energy-intensive process that uses a lot of electricity, and the government is blaming the recent surge in crypto mining for the shortage.
Their claims might not be without merit, as the crypto mining industry in Kazakhstan has skyrocketed since China’s complete crypto ban in September. China was the world’s largest crypto mining hub at the time, with Kazakhstan already in second place. When mining operations had to shut down or flee China, many fled to neighboring Kazakhstan.
Today, the US is the world leader in crypto mining after accelerated growth following China’s ban. Kazakhstan still retains its 2nd place ranking, although with a higher overall share than it used to have. When electricity shortages in January led to the government temporarily cutting off power to mining operations, the world’s Bitcoin hashrate fell by 10%.
Future Could Bring More Challenges for Kazakhstan Miners
Crypto miners in Kazakhstan face an uncertain future, with many already choosing to relocate their operations. The US has become a destination for many mining companies, with highly favorable regulations in some states. However, making a move from Kazakhstan to the US is by no means a simple or easy process. Many crypto miners have no choice but to stay in Kazakhstan and face the coming challenges.