The government of Kazakhstan collected 652 million tenges ($1.5 million) in fees from cryptocurrency miners in the first quarter of 2022. The country, which has offered a safe haven to nearly 90,000 mining units in China, is nevertheless struggling to maintain the stability of its electricity network.
Reduced revenue
According to a recent government report, Kazakhstan managed to collect $1.5 million in mining fees during the first quarter of 2022. Yet last April, a bill to increase mining taxation in Kazakhstan was announced, Rejected.
The deputy energy minister, Murat Zhurebekov, had indeed called for cracking down on undeclared minors. The latter proposed the coming into force of a surtax of $0.0023 per kWh. For some mining companies, this surcharge was a way to legitimize the activities of undeclared miners. Via this payment, the latter would align themselves, in a way, with the legal framework in place.
Moreover, these revenues have been collected despite the fact that the national internet network suffers from occasional outages. The electricity network has, for its part, come close to saturation on several occasions.
We can read in this report that “the fee is invoiced for the actual quantity of electrical energy consumed in the implementation of the activities.” In terms of revenue, the region of Nur-Sultan, the capital of the country, is the one that generates the most revenue from mining, with 277.3 million tenges. Western Kazakhstan produces 143.1 million tenges. Aktobe, the country’s fourth city, also mines the equivalent of 48.9 million tenges.
Revenues collected in the context of mining taxation enter the national budget, not the regional one. Therefore, the latter will be broken down independently of their origin within the territory.
The attractiveness of the country is faltering
Kazakhstan received nearly 90,000 computers moved from China in spring 2021. The country offers a favorable legal framework as well as relatively moderate electricity tariffs. However, since this massive arrival, the country has struggled to meet demand. Its electricity infrastructure, based essentially on coal-fired power stations, is no longer sufficient to meet national needs.
The government, therefore, decided to reduce demand on the network by cutting off electricity to miners. He also asked for help from Moscow via his company Inter-RAO. In Russia, this company holds the monopoly on the supply of electricity and exports this one to many countries, of which Azerbaijan, Belarus, China, Georgia or, today, Kazakhstan.
Professor Luca Anceschi of the University of Glasgow doubts the effectiveness of this assistance in the long term. He says: “It is certain that the electricity contribution from Russia can solve the problem in the short term, but I think that there is a big discussion to be had on the type of energy policy that Kazakhstan is really pursuing.”
Moreover, according to him, the miners are not at the origin of the problems that arise on the country’s electricity network. This narrative would aim to avoid looking into the difficult question of the lack of maintenance of the network as well as the absence of electricity transmission from the north to the south of the country.
Therefore, some miners have decided to leave the country, given the significant losses and risks resulting from the power cuts. Bitfufu thus turned heel in December 2021, followed by other companies soon after.
Nevertheless, the fraction of minors having decided to leave the country remains minimal. Alex Brammer from Luxor Technologies said: “We were expecting something similar to what happened when they announced the ban in China, and we haven’t seen that yet. Kazakhstan”.
The Kazakh electricity grid operator recently said that maintenance and repair work would start soon.
