Tax on electricity mining Is Kazakhstan still the “meat and potatoes” for miners?

Despite the bold attempts of the head mining industry, such as Kanan Technology and Bit Mining, miners still have to pay close attention to the electricity problem in Kazakhstan.

In May-June, China’s boycott of bitcoin-led cryptocurrency mining and trading activities gave its western neighbor Kazakhstan a much-needed opportunity.

For Chinese miners, Kazakhstan is not far away, making the transfer of mining equipment and operations relatively easy. A large portion of Chinese bitcoin mining (about 36%) takes place in China’s western province of Xinjiang, which borders Kazakhstan.

Now, Kazakhstan has also made new moves regarding cryptocurrency mining.

Introducing a tax on electricity consumption

On July 1, Kazakhstan’s President Kassym-Jomart Tokayev signed a new law this week amending the Central Asian Republic’s “Taxes and Other Budgetary Obligations for Payment” legislation that will impose an additional charge on electricity used by the energy-intensive industry of cryptocurrency mining.

The bill, which was reportedly voted on by the Senate in early June, would require cryptocurrency miners to pay a surcharge of about $0.0023 ($0.015) for each kilowatt of electricity used. The law, once passed, will take effect on January 1, 2022.

According to the description of the draft, the regulation of mining in Kazakhstan is aimed at obtaining additional financial resources for the state budget and stopping the consumption of electricity from uncontrolled mines.

In fact, starting in 2020, Kazakhstan’s Ministry of Economy has proposed plans to impose a 15% tax on cryptocurrency mining and plans to establish new electricity tariff rules for cryptocurrency mining.

Analysts say the country’s electricity prices are still low and have not stopped cryptocurrency miners from mining in Kazakhstan.

Kazakhstan’s electricity is mainly thermal and costs are largely stable throughout the year. According to research by Riarating, a research center owned by RIA Novosti, it is Kazakhstan that ranks first on the list of cheap electricity for residential use in Europe. According to globalpetrolprices data, in September 2020, residential electricity in Kazakhstan was $0.041/kWh and commercial electricity was $0.052/kWh, while according to the posting, a mine in Kazakhstan provides electricity for $0.22/kWh.

The “meat and potatoes” of Kazakhstan

In addition to relatively cheap and stable power sources, regulation and taxes mean that crypto mining in Kazakhstan is legalized, making it more attractive to both local and foreign players. At the same time, with the tightening of regulations on bitcoin mining in China and the rise of the miners’ offshore movement, Kazakhstan has become the “meat and potatoes” of miners’ eyes.

The first batch of Avalon mining machines are already on the shelves and running. The first batch of Avalon machines are already up and running. The center will help provide after-sales service for local customers, such as machine testing and maintenance, warranty service and technical consulting.

On May 24, 2021, Bit Mining (formerly 500.com) announced that it has signed a legally binding investment terms with a Kazakh company to jointly invest in the construction of a mine in Kazakhstan. The company plans to invest a total of RMB 60 million (approximately $9.33 million) to build and operate a 100 MW load mine with the partner. Then, on June 22, Bitcoin mining giant BITMining announced it had successfully delivered its first 320 mining machines to Kazakhstan, with a total computing power of about 18.2 PH/s, and the first machines will go into operation on June 27. The company said it expects to deliver a second and third batch of a total of 2,600 miners by July 1, with a theoretical maximum total computing capacity of 102.3 PH/s, and to ship its remaining miners to overseas data centers in the coming quarters.

On October 25, 2020, Microbit Mining Pool (ViaBTC Pool) announced a global strategic cooperation with and overseas mining farm Enegix to layout Kazakhstan. Stemming from the earlier layout of overseas markets, ViaBTC Pool has performed significantly better than other mining pools in this epic decentralization of Bitcoin.

In addition, some U.S. institutions have also taken a liking to Kazakhstan, and on June 17, U.S. cryptocurrency consulting and mining company Wattum signed an agreement to acquire a crypto mining facility in Kazakhstan operated by Israeli renewable energy power producer Energix. The two companies will build a mining facility to provide 16 megawatts of energy for mining machines and have committed $2 million to the joint venture. wattum and Energix are also in talks for another 50 megawatt mine at a cost of $8 million.

Power problems remain evident

Despite the bold attempts by head mining companies such as Karnan Technologies and Bit Mining, and the naturally cold climate that gives mining operations significant power cost savings, miners still have to be very aware of Kazakhstan’s power problems.

On February 12 of this year, Kazakhstan’s Competition Protection and Development Agency Director Zhumangalin publicly stated that, at present, Kazakhstan has a surplus of electricity supply, with an annual power generation of 106 billion kilowatt hours and electricity consumption of about 105 billion kilowatt hours in 2020. However, according to experts’ forecasts, in the next 2-3 years, Kazakhstan will face power shortage and lack of power generation capacity.

Public information shows that most of Kazakhstan’s power equipment was put into service in the 1960s and 1970s. By the end of 2020, the depreciation rate of this equipment will be 53%. The main cost of power plants is used to keep the equipment in regular operation, and most of them are profitable at a level lower than the actual cost. The number of accidents and technical disruptions has increased due to insufficient funding.

According to Xinhua news in May this year, Kazakhstan’s electricity production pattern and the imbalance between supply and demand are prominent problems. On the one hand, coal-fired power plants dominate Kazakhstan’s electricity production, with thermal power generation accounting for more than 80% of total power generation. On the other hand, because coal mines are concentrated in the north of Kazakhstan, the northern region accounts for 70% of the country’s total power generation; while most of the population is gathered in the southern region, the southern cities consume about 70% of the country’s electricity, which needs to be transported from the north over long distances.

At present. Kazakhstan has 155 power stations, of which 69% are coal-fired power stations and 9% are hydroelectric power stations. Kazakhstan’s renewable energy reserves are considerable and are under active development. According to government plans, the share of renewable energy generation will increase from the current 3% to 6% by 2025, reach 10% by 2030, and further increase to 50% by 2050.

Although miners are increasingly looking to Kazakhstan, but whether it’s mining machine transportation, or mine construction, or power cooperation, every step needs to be well thought out, miners still have a long way to go to go to the sea.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/tax-on-electricity-mining-is-kazakhstan-still-the-meat-and-potatoes-for-miners/
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