On August 28, the Ministry of Economy of the nation of Kyrgyzstan submitted a draft law to introduce taxation on cryptocurrency mining within the country. The law, known as “On Amending the Tax Code,” is specifically aimed at finding ways to tax those involved in digital currency mining operations.
This is a great example of “when you can’t beat them, join them.” Back in July 2014, the government specifically banned cryptocurrencies from use within Kyrgyzstan. At the time, the National Bank of the Kyrgyz Republic provided a report where they had declared the use of SegWitCoin (BTC) or any other form of digital currency to be illegal and against the best interests of the country.
Three years later, the Central Bank issued a statement declaring that they were “not considering introducing any prohibitions or restrictive measures regarding the mining of cryptocurrency.” This, despite the fact that the country had not modified its ban on owning or trading in virtual currencies. The mining of cryptocurrency and the use of blockchain technology were also banned as a part of that 2014 law.
A few months later, Tolkunbek Abdygulov, the head of the National Bank of Kyrgyzstan, issued a statement declaring that the bank would no longer stand in the way of a cryptocurrency market developing within the country. He saw it as an evolutionary process, where it seemed inevitable that these currencies would become a part of the financial landscape of the country. He explained that the time that it was nearly impossible to ban people from acquiring the currency, but explained: “that residents of Kyrgyzstan investing in cryptocurrency do so at their own risk.”
This tacit acceptance of crypto mining has led to a number of operations performing this task. In fact, it is believed that within the Kyrgyz Republic there are roughly 80,000 devices that are involved in crypto mining operations.
Since it is inevitable that people are going to continue to mine for these currencies, the government is now looking to reap the benefits of it through taxation. There are currently two plans that are being floated, with one option being to tax the income from the mining of these currencies, while the other is taxing the expenses, such as utilities, that are required for mining operations. It would not be surprising to see if both options are implemented.
According to a recent report, the Kyrgyz government stands to earn as much as 300 million som ($4.2 million). That is a fairly substantial amount for a country whose annual budget is only about $1 billion.
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