Kazakhstan: Why Crypto Miners Need Amendment of Registration Rules
Crypto Miners to File Quarterly Reports with Kazakhstan Authorities
Bagdat Musin, Kazakhstan's digital development minister, has made it more difficult for people who mint digital coins to register and report. If a company or legal entity wishes to mine cryptocurrency, it must notify regulators at least 30 days in advance. The same is true for businesses and those who provide services to them.
Cryptocurrency miners must now provide their company's name, registration number, contact information, bank details, and IP addresses. They must also explain how much energy their mining facilities consume, what investments they intend to make, and how many employees they employ.
Copy of customs declarations or other proof of ownership of mining equipment, proof that the people working on the project live in Kazakhstan, information about the location of the mining farm in Kazakhstan, and a technical description of the hardware's connection to the power grid.
Every three months, the government requires similar reports from existing miners and the companies that keep them running. In addition, mining companies that decide to stop operations must notify the state within ten days.
Why Were The Crypto Mining Rules Amended?
The government in Nur-Sultan is cracking down on cryptocurrency mining. This comes a year after Kazakhstan became a haven for miners seeking to avoid China's mining crackdown. The government has been pursuing people who mine Bitcoin illegally. However, even legal Bitcoin farms have experienced power outages due to a lack of electricity.
Due to shortages, some companies have already left the country, and dozens of mining facilities have been closed this year. Auditors have also been working to close tax loopholes that some miners have exploited. Simultaneously, the government is preparing to raise taxes on miners who remain in Kazakhstan, with the tax tied to the value of the digital currency they mine.
Consequences of Cryptocurrency Mining Chaos In Kazakhstan
The main goal of cryptocurrency is to keep governments and banks out of the payment system. With this, they can't charge unnecessary fees. However, some countries and governments refused to allow people to use the system on their territory. For example, the government of Kazakhstan did not allow cryptocurrency payments until 2018.
Several Kazakhstani experts gave the following reasons for the ban: It erodes the state's monopoly on making money and reduces demand for local currency, causing it to lose value. It also makes it more difficult for central banks to control monetary policy. Furthermore, it reduces or eliminates the number of financial middlemen.
Akishev, the head of the National Bank of the Republic of Kazakhstan, strongly agreed with the above explanations. He claims that because the system is completely unpredictable, criminals will likely use it to launder money.
Other consequences include the following:
Negative impact on electricity
Cryptocurrency has been tagged a "killer of electricity." Bitcoin, a popular cryptocurrency, consumes 110 terawatt-hours of electricity per year. This is equivalent to 0.55 percent of global electricity production. This is enough to power a small country like Malaysia or Sweden for an entire year. In June 2020, Kazakhstan's President Kassym-Jomart Tokayev legalized the "digital code" in the country.
After China banned cryptocurrencies in May, the market exploded. Because the activity consumes a lot of electricity, it is becoming more popular in areas where electricity is inexpensive. For example, one kilowatt-hour of electricity costs about five cents in Kazakhstan, while it costs nine to eleven cents in Russia, China, and the United States.
In recent months, the amount of energy used to mine Bitcoins in Kazakhstan has increased. As a result, Kazakhstan ranks second in the global Bitcoin mining market, trailing only the United States.
Political Instability
Before January 2022, Kazakhstan was a politically stable country. This was another reason for the migration of many "Bitcoin mining" there. To end the protests, the government shut down the internet on January 5, 2022.
However, the country became unstable when the government raised oil prices in January 2022, causing a lot of protests. As a result of this, the country became insecure. In addition, this government action harmed Kazakhstan's Bitcoin mining industry, accounting for 15–20 percent of the world's Bitcoin mining capacity.
At this time in January, the price of Bitcoin fell below $43,000 between January 6th and January 8th. Different sources also claim that there are concerns about cryptocurrency mining, even though the country's political situation remains unstable. In addition, some believe that because fossil fuels generate two-thirds of Kazakhstan's electricity, this industry could relocate to the western part of the United States, specifically Texas.
Which option is better for the environment? Even though there is an expectation for the mining industries to relocate to the west, where electricity is cheap and renewable, the price of electricity is expected to rise even further, reaching $100,000 by the end of the century.
Price fluctuations
The innovations of the twenty-first century have significantly altered our lives. For example, Bitcoin mining has simplified our purchasing power. Bitcoin is an electronic currency used to buy things online all over the world and consumes so much electricity that it is said to be enough to power a small country like Sweden for a year. Moreover, its value has increased dramatically since its inception in 2007. The value is more than $30,000, and some believe it will be worth $100,000 by the end of the century.
Kazakhstan has some of the most affordable electricity rates in Central Asia and was able to continue using Chinese cryptocurrency practices after China banned them. However, cryptocurrency mining will likely shift to western countries, particularly Texas. This is because of the low cost of electricity generated by renewable energy sources. If mining moves to the United States, the cost of renewable energy will rise, potentially leading to changes in how energy is regulated and taxed. This could result in price fluctuations.