Kazakh Crypto Miners Demand Taxation Revision

In a bid to preserve the once thriving crypto-mining industry of Kazakhstan, major operators have rallied together, expressing their grievances towards the government’s existing taxation policy. In an earnest appeal to President Kassym-Jomart Tokayev, eight prominent cryptocurrency mining firms have voiced their concerns over the high energy costs that are currently plaguing the industry.

The group consisting of BCD Company, TT TECH Limited, KZ Systems, AI Solutions, Green Power Solution, VerCom, and Kinur Invest, have articulated the dire circumstances in an open letter. They depict a distressing scenario where the inflated energy prices have brought the industry of cryptocurrency mining to a standstill. The letter emphatically states that unless there’s an intervention, the mining operations in Kazakhstan will become extinct by the year’s end.

The core of the issue stems from the taxation policy initiated on January 1, 2022, which was aimed at curbing the untaxed electricity consumption by mining entities. This policy has however inadvertently escalated the costs for miners, making the operations unviable. Even though the taxed electricity cost in Kazakhstan stands at a mere $0.067 per kilowatt-hour (kWh), a little over a half of the United States’ average of $0.12 per kWh, the impact on miners is profound due to the sheer volume of electricity that mining operations require.

The miners argue that this taxation policy has severely impacted Kazakhstan’s position on the global crypto-mining stage. The statistics speak for themselves, with a sharp decline from 14.03% global volume share in 2022 to a mere 4% in 2023. This downturn, they assert, is a direct consequence of the unbalanced tax rules which have now made the cost of electricity surge to a point where it accounts for up to 80% of the value of mined digital assets.

This outcry comes at a critical juncture where the miners have, until now, cooperated with the government’s regulatory measures. They have adhered to the licensing prerequisites, ensured legal connectivity to the power grid, and even established a transparent mechanism to determine the income base for corporate taxation. However, the prevailing tax regime threatens to obliterate the industry, compelling these entities to consider ceasing their operations in Kazakhstan.

Kazakhstan emerged as a crypto-mining hub, especially post the crackdown on this industry by China. The favorable conditions in Kazakhstan attracted a multitude of miners, creating a booming sector which, unfortunately, is now on the verge of collapse. The urgent plea from these eight major crypto-mining firms reflects the earnest desire to revive the industry that once held a promising future in the nation’s economic landscape.