Electric Energy Crisis, Kazakhstan's President Will Raise Bitcoin Mining Tax

Kazakhstan will raise its bitcoin mining tax. (Bitcoin.com News)

JAKARTA – Recently the President of Kazakhstan Kassym-Jomart Tokayev instructed the authorities to identify all crypto mining companies in his country. Although Kazakhstan does not prohibit crypto mining, the government plans to increase taxes on mining proceeds.

Efforts to increase taxes are driven by high electricity consumption. Therefore the government is also raising electricity rates for crypto mining companies. The reason is, Kazakhstan is currently experiencing an electricity supply crisis that has forced a number of mining companies to leave. Bitcoin mining companies still based in Kazakhstan are facing tax hikes and tighter scrutiny than ever before.

Reporting from Bitcoin.com News, in a meeting with ministers that took place this week, President Kassym-Jomart Tokayev instructed the government to prepare comprehensive regulations for the crypto mining industry on April 1, this is aimed at mining companies fulfilling their obligations.

Local media reported this week that authorities in the Central Asian country are considering a five-fold increase in the electricity tax that miners are expected to pay. Last summer, Kazakhstan introduced a surcharge of 1 tenge (about US$0.0023) per kilowatt-hour used to print digital currency.

“Current rates are negligible. I instruct the government to work on some of these tax increases as soon as possible," Tokayev was quoted as saying by Tengrinews.

The number one person in Kazakhstan explained that the bitcoin mining business does not have a socio-economic impact. The reason is that the crypto mining sector does not create many jobs or products but instead consumes more energy.

In some cases, miners often use subsidized electricity and do not pay customs duties on imported equipment while cashing in on their profits in other jurisdictions. The Kazakh president also stressed that the state does not prohibit crypto mining, but insists it will tax all mining facilities and check all technical documents.

President Tokayev asked the Financial Monitoring Agency to closely monitor and report the results by March 15.

“Those who want to work in this field must have the appropriate permits, receive electricity at an adequate rate, declare income and pay taxes, launch green energy projects,” President Tokayev instructed.

Kazakhstan has become a new haven for bitcoin mining since China launched a crackdown on the sector in May last year. As of August 2021, the country's market share in global bitcoin hashrate has reached 18%, second only to the United States.

Miners were initially welcomed by the Kazakh government, but energy shortages are increasing in the country. The government blamed the crypto mining industry for the problem. This prompted the government to shut down crypto mining amid the blackouts that occurred in the winter.

Mass protests over rising energy costs, especially the price of fuels such as natural gas, erupted in early January, threatening the Tokayev government. To quell the unrest, the government closed local banks and restricted access to the internet which also affected crypto miners.