Kazakhstan block reward miners: High energy prices are killing us

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Block reward miners in Kazakhstan have implored the country’s president to reduce energy prices as they threatened to shut down operations by the end of the year.

In a letter to President Kassym-Jomart Kemeluly Tokayev, the BTC mining firms claimed that the energy costs for miners in the Central Asian country are too high. The mining sector, once one of the world’s largest, “is in extremely dire straits,” the letter stated, as reported by local media outlets.

The appeal was signed by eight miners operating in Kazakhstan, including BCD Company LLP, Kinur Invest LLP, Green Power Solution Ltd, and KZ Systems.

“Today, all the largest representatives of the industry have suspended their activities and plan to completely cease their business in the Republic of Kazakhstan by the end of the year,” the miners stated in the letter.

Kazakhstan was once one of the biggest players in the BTC mining sector. In 2022, only the U.S. and China had a higher share of the BTC hashrate than Kazakhstan’s 14%. Then came a raft of new regulations that required miners to register with authorities, obtain a license, and sell 75% of the mined assets immediately. The new regulations also hiked the taxes on the energy supplied to miners, driving up the cost of electricity.

“As a result, our country lost its share of the global volume of digital mining from 14.03% in 2022 to 4% in 2023,” the miners said. This new tax regime “essentially destroys the industry and does not allow digital asset miners to optimize their activities in order to reduce costs. Up to 80% of the cost of digital asset mining is the cost of electrical energy.”

The Kazakh president previously stated that he intends to make the country a digital assets hub, with enabling regulations being the first step. However, the miners say that unless the power charges drop, this ‘crypto hub’ ambition will remain a pipe dream.

“For what purpose does the Republic of Kazakhstan declare to the whole world its goal of becoming a regional crypto hub and developing data centers for data processing if the digital mining industry is on the outskirts of the country’s economic agenda and is stagnating due to ineffective and unbalanced tax regulation?”

‘Lower power costs or ban mining altogether’

Kazakhstan is one of several countries which initially welcomed BTC miners but are now backtracking. Earlier this year, President Tokayev signed into law a draft bill that allowed miners to tap into the national grid only when there’s a surplus.

Even when they tap into the grid, the miners are charged higher than other power-intensive industries. Miners currently pay over 26 tenge ($0.06) per kilowatt hour (kWh), which they claim is too high.

“If the state does not take urgent measures, the digital mining industry in the Republic of Kazakhstan will cease to exist. All that remains is to simply ban digital mining at the legislative level and join the list of countries that have already implemented a similar ban: Bangladesh, Iraq, Bolivia, Colombia, Egypt, Iran, Kosovo, and Nepal.”

Other mining havens are turning against the industry. In Iran, the government regularly cuts off the industry from the national grid when the power demand is high. Norwegian legislators attempted to ban BTC mining last year, but the draft bill failed to sail through parliament. Kosovo prohibited mining last year after winter blackouts.

In the U.S., some states are phasing out mining, citing environmental concerns. Last year, New York Governor Kathy Hochul signed a law banning proof-of-work mining that relies on carbon-based fuels. In Texas, state legislators are pushing to cut off miners from the state’s grid balancing programs. A month ago, the Kentucky public utilities regulator rejected a proposal to offer power subsidies to miners.

Watch: Think of Bitcoin mining as financial self-discipline