Taxes from cryptocurrency mining companies brought in about $7 million for the Kazakh government last year.
Kazakhstan has received 3.07 billion tenges (almost $6.9 million) in tax payments from crypto miners in 2022, the country’s State Revenue Committee of the Ministry of Finance announced, according to reports by local media.
The country imposed a surcharge of 1 tenge ($0.0023) per kWh in January of last year to legitimize mining operations, which is when the mining fees were introduced.
As of April 27, the nation had received 240 million tenges, or more than $541,000, in mining fees, according to official government data.
The data indicates a sharp decrease from the same period in the previous year, when fees collected by Kazakhstan in the first quarter of 2022 amounted to 652 million tenges, or roughly $1.5 million.
Kazakhstan has become one of the top Bitcoin mining hubs worldwide, ranking third in the world in terms of the average contribution to the Bitcoin hash rate, as per data from the Cambridge Centre for Alternative Finance.
As of January 2022, the Central Asian nation contributed 13.22% of the total Bitcoin hash rate, trailing only the US (37.84%) and China (21.11%).
The imposition of taxes on cryptocurrency mining, which was predicated on the amount of electricity utilized by mining companies, has sparked some worries about the industry’s viability in the nation.
After the public in Kazakhstan became increasingly incensed over cryptocurrency miners’ allegedly underpaid use of the national power grid, the tax regulations were implemented.
Kazakhstan Offers Refuge to Displaced Chinese Miners
A large number of international mining companies moved to Kazakhstan in 2021 as a result of China’s announcement that all cryptocurrency-related transactions and mining operations would be prohibited.
According to some estimates, after China’s miner exodus, more than 87,849 rigs were brought to the region by November 2021.
The increasing demand even put strain on Kazakhstan’s electrical grid, leading to blackouts in many of the nation’s towns and villages.
In response, the government promised to lower the demand on the grid by cutting off mining workers’ access to electricity and searching for alternative sources of supply from Moscow-based Inter-RAO, an energy company that supplies Russia’s eastern neighbor.
The government recently declared its intention to enact new crypto laws in an effort to stop tax evasion and illegal business activities.
A proposed regulation would require miners to sell at least 75% of the cryptocurrency they earn through registered exchanges, while another would require government approval for issuers of secured digital assets. Both better governance and a decrease in tax evasion are anticipated from these new rules.
Notably, some analysts think that the unpredictability of regulations and the erratic power supply have contributed to Kazakhstan’s declining share of Bitcoin mining over the past year.
As of May 2021, Kazakhstan’s share has decreased to just 4% from a peak of 18%, according to industry analyst Jaran Mellerud of Norway.