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Kazakhstan’s miners face stiffer regulations following new bill

Dark days lie ahead for block reward miners in Kazakhstan as new legislation for the industry inches closer.

The bill titled “On Regulating Digital Assets in Kazakhstan” is headed for the Senate after a prior approval in the Mazhilis, the country’s lower house. Upon approval by the Senate, the bill becomes law after the president has signed it, and experts believe it could usher in sweeping changes for the industry.

Lawmakers propose allocating 500 megawatts (MW) to digital asset miners. Industry players have argued that the planned electricity falls below standard as miners consume over 1,000 MW.

However, others are looking at the silver lining in the dark clouds, saying that the allocation proves that the government is not looking to impose a blanket ban on block reward mining. Since word of the tapering has hit the public, several miners have begun exiting the country to friendlier jurisdictions.

The incoming legislation will require miners to buy electricity from the state-owned KOREM, which miners believe could impose unnecessary bureaucracies. Furthermore, only miners that are registered with regulators will be able to access the 500 MW.

Aside from rationing electricity supply to miners, the incoming legislation imposes a corporate tax on them while benefits like the use of special economic zones have been withdrawn. At the moment, a new tax regime for miners is expected to come into effect in 2023, which could result in a case of double taxation for the miners.

“The government wants more control and taxes,” said one miner amid the growing uncertainty in the industry. “Trust is shaken, many investors left Kazakhstan and canceled expansion plans.”

Lastly, new licensing categories will be put in place by virtue of the bill becoming law, with the first being for miners that own their entire equipment while the other is for firms that host their machines upon the infrastructure of other firms.

From paradise to dystopia

Kazakhstan rose from relative obscurity to become the leading country for block reward miners after China’s brutal crackdown on the industry in the summer of 2021. Hordes of miners left Mainland China and settled in Kazakhstan, drawn by the promise of cheap energy and friendly regulators.

At the height of its powers, Kazakhstan was the second largest BTC hash rate provider, following a leap of nearly 40% in months. Only the United States provided more hash rate than the Asian country, while Russia and Canada occupied the third and fourth place, respectively.

However, things began to fall apart for the budding mining industry when the Soviet-era power grid began to falter, given the sheer demand by miners. The prospects of energy shortages in the winter forced regulators to stifle the electricity supply for miners while law enforcement agents launched a crackdown on unregistered mining operations.

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