The government of Kazakhstan is stepping up its efforts to regulate and tax the cryptocurrency mining industry within its borders. Following the implementation of an amended law targeting the fiscal liabilities of crypto miners, the government reportedly received 3.07 billion tenge (about $7 million) in tax payments from mining entities in 2022. However, preliminary data for 2023 reveals a drop-off in tax payments, with 240 million tenge (approximately $541,000) collected by April 27, a significant decrease from the 652 million tenge (around $1.5 million) in fees recorded for the first quarter of 2022.
Kazakhstan has emerged as one of the world’s leading Bitcoin mining hubs, contributing to 13.22% of the total Bitcoin hash rate as of January 2022, placing it just behind the United States (37.84%) and China (21.11%). This growth can be attributed to the wave of foreign mining operators who relocated to Kazakhstan in 2021, following China’s crackdown on mining activities. It is estimated that more than 87,849 rigs were brought into the country by November 2021 due to this migration.
The introduction of taxes on digital mining, which came into effect on January 1, 2022, is based on electricity consumption by mining entities. This move was prompted partly by growing national frustration with undertaxed usage of the national power grid by crypto miners, which negatively impacted relations between miners and the government. Additionally, the amended legislation was seen as a legal pathway for increased adoption of cryptocurrencies amid tightening global regulations.
In light of the growing attention on crypto mining, the government of Kazakhstan has proposed new regulations aimed at curtailing tax fraud and unlawful business operations. One of these proposals involves requiring government approval for secured digital asset issuers, while another would mandate miners to sell at least 75% of their earned cryptocurrencies through registered exchanges. These measures are predicted to reduce potential tax evasion by mining operators.
While these regulatory changes may help alleviate some tensions between miners and the government, they also raise questions on the balance between fostering an attractive environment for crypto mining and ensuring a fair contribution to the nation’s economy. The decline in tax revenue from the mining sector in 2023 could signify further complications down the road if these regulatory measures fail to provide the desired results.
In conclusion, the future of cryptocurrency mining in Kazakhstan is uncertain, with the government attempting to strike a balance between growth and responsible regulation. It remains to be seen whether these efforts will succeed in maintaining the country’s status as a leading crypto mining hub while safeguarding national interests and promoting fair taxation.
Source: Cointelegraph
