Kazakhstan shuts down 13 illegal mining farms as energy shortage bites

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The world’s second-largest block reward mining hub is cracking down on illicit miners amid concerns about their high power consumption. Kazakhstan has shut down 13 illegal miners who it claimed had been guzzling massive power for months.

Kazakhstan is only second to the United States in block reward mining, being among the biggest beneficiaries of the miners’ exodus from China in 2021. However, the government has been grappling with supplying these miners with enough energy to power their mining rigs, with the country experiencing an energy shortage in recent months. 

Illegal miners have exacerbated this situation, with authorities saying these miners use just as much energy as the licensed ones without any of the cost.

The Kazakh Ministry of Energy has shut down 13 such mining operations in Karaganda, Pavlodar, Turkistan, and Akmola provinces, it said in an official statement. Combined, the 13 had consumed 202 megawatts of power, it said. The crackdown was conducted by employees of the Ministry, the Committee for Nuclear and Energy Supervision, local police, and other state body representatives.

The Ministry also pledged to keep cracking down on illicit miners as the country seeks to strike a balance between supporting the new industry and having enough energy to power its households.

As CoinGeek reported, one of the measures the government is considering is imposing extra taxation on electricity consumed by miners. President Kassym-Jomart Tokayev proposed the tax this month, and it could be five times higher than with other industries.

The energy shortage in Kazakhstan, coupled with proposed higher taxes and political unrest, has led several licensed miners to start relocating to other jurisdictions. According to Alan Dorjiyev, the president of the National Association of Blockchain and Data Center Industry of Kazakhstan, miners have relocated about 30% of their mining equipment from Kazakhstan.

Alan, whose organization represents about 70% of the country’s miners, said that Kazakhstan is quickly becoming an “unfavorable jurisdiction for the crypto mining business.”

Watch: CoinGeek New York panel, How to Achieve Green Bitcoin: Energy Consumption & Environmental Sustainability