Kazakhstan Goes Hard Again on Bitcoin Mining

The second largest Bitcoin mining country in the world, Kazakhstan, has tightened the reins on Bitcoin mining by publishing new regulations to prevent tax evasion and illegal trading activity.

President Kassym-Jomart Tokayev signed the new set of laws which emphasized the country’s resistance to illegal mining activities and the issuance of digital assets. Its objective is to lay the foundations for the development of the crypto business and fair competition among market players. The newly signed law addressed two main issues, the issuance and circulation of digital assets and the sale of digital assets.

In addition, the digital assets law, which was submitted to parliament at the end of January, outlines the authority of government entities in charge of the industry and introduces licenses for crypto miners and exchanges, replacing the current registration system.

On issuance, the new regulations state that issuers of digital assets must operate with the permission granted by the Astana International Financial Center (AIFC) on behalf of the government. On top of that, the issuers of these digital assets will be subject to financial monitoring as provided by law as a way to counter financial terrorism or money laundering activities. This legislation will enter into force from April 1, 2023

Regarding the sale of digital assets generated by digital mining activities in the country, the new regulations require that at least 75% of assets be sold through AIFC-authorized digital asset exchanges. This will allow the government and authorities to track the income of digital miners and digital mining pools for tax purposes and will help reduce cases of tax evasion. This section of the new regulations will be in force from January 1, 2024 to January 1, 2025.

The laws also stipulate that mining licenses will be granted for a period of three years based on two categories. The first is a digital miner who owns or legally owns a compliant digital mining data center certain standards in terms of equipment, location and security. The second is a digital miner who does not own a digital mining data center and conducts digital mining with their own mining hardware and software in rented space in a digital mining data center.

New laws on energy consumption

Among the many reasons why the Bitcoin migration occurred, one of the main reasons miners moved to Kazakhstan was due to the availability of cheap and subsidized electricity. This led to an influx of miners into the country which translated into enormous power directed at mining activities. Since then, officials in the Central Asian country have blamed miners for growing power shortages, prompting the temporary shutdown of registered facilities and the closure of illegal companies to balance power consumption.

Since the start of the year, crypto miners have been subject to a surcharge on their energy consumption bills. Fees are calculated on a progressive scale based on the amount and source of energy they use in their mining activities, so the more energy you use, the more fees you have, and the more sustainable your energy source, the lower. will be your rates.

The new law it allows miners to draw power from the national grid only when there is a surplus, limiting industry power use. The surplus will be divided among the authorized operators who will be able to bid for the electricity. This restriction will not apply to miners using renewable energy, imported energy, or their own power production capacity that is not connected to the grid.

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