In a poignant plea to President Kassym-Jomart Tokayev, digital asset miners in Kazakhstan have raised an urgent request for a reduction in energy costs. An open letter signed by the representatives of eight major mining entities including BCD Company LLP, TT TECH Limited Private Limited Company and AI Solutions LLP, divulges that due to a steep increase in energy prices, a broad majority of industry representatives has announced a suspension of operations. Even worse, they project a complete withdrawal of their business from Kazakhstan by year-end if the current conditions persist.
This trend of widespread industry desertion runs in stark contrast with the country’s established status as a Bitcoin powerhouse, a noted third in terms of global mining hashrate. Yet, recent government regulations have proven detrimental, spiraling the country’s grasp on the global mining volume downward from a robust 14% in 2022 to a paltry 4% in 2023. The plea insinuated that the fallout is a direct consequence of an ill-conceived differentiated system introduced in 2023 that charges an untenable fee rate of up to 26 tenge/kWh.
Naturally, the exorbitant fees trigger a domino effect of downturns for digital miners, who are finding it increasingly challenging to optimize their operations, contend with falling digital asset prices, and offset soaring electricity generation costs – which now constitute 80% of the digital asset expenses.
At the root of this impasse is a tightening energy scenario in the wake of an overwhelming influx of miners to Kazakhstan. This unexpected migration, instigated by a prohibition on mining by China, has amplified the energy demand from 500 MW to 1,500 MW within the country, culminating in a high tax imposition on the sector.
Thought leaders in policy-making and miners alike eagerly anticipate a resolution that staves off the imminent extinction of the mining industry within the country’s borders- a demise that paradoxically looms large despite Kazakhstan’s avowed commitment to being cryptocurrency-friendly.
In summary, a global regulatory frenzy castigating virtual asset mining is unfolding against the backdrop of looming climate concerns and critical national electricity supply disruption. As the US Biden administration pushes a 30% mining taxation, ironically labeled “fair share”, trailblazers in cryptocurrency mining like Kazakhstan face the considerable challenge of nurturing an industry on the brink. Without careful, judicious negotiation of policy changes and taxation structures, the survival of a once thriving mining ecosystem hangs in the balance.
Source: Cryptonews
