From Frying Pan into Fire: Chinese Bitcoin Miners Face Restrictions in Kazakhstan

From Frying Pan into Fire: Chinese Bitcoin Miners Face Restrictions in Kazakhstan

According to an article by NeftegazRu, after many crypto miners relocated from China to neighboring Kazakhstan, local authorities embraced crypto and welcomed cryptocurrency miners coming over with their gear. In 2020, the parliament passed a law to legalize cryptocurrency and crypto mining.

However, due to numerous power shortages, they seem to regret their decision about letting miners use their electricity for verifying blockchain operations. Curiously, three years ago, the local central bank called for banning cryptocurrency mining and digital assets.

Due to power shortages, Kazakhstan began to implement power curtailment measures for #Crypto mining— 8BTCnews (@btcinchina) October 21, 2021

Kazakhstan welcomes miners from China

Kazakhstan has been facing multiple power shortages recently after many mining companies started shifting from China there, bringing their mining gear with them.

The country’s authorities welcomed them, planning to turn Kazakhstan into a crypto mining hub, using coal-based energy that is produced in the region. 90 percent of power in the country in 2020 was generated using fossil fuels.

Miners have turned into the country’s largest energy consumers. According to the bill passed in 2020, mining was legalized, as well as cryptocurrency brokers.

Crypto miners were to pay taxes and receive investments from the government. After the law was approved, 13 mining farms began operating in the country, they got investments of approximately $188 million.

By 2025, the government expects investments in crypto mining reach a whopping $1.2 billion. After China made another crackdown on miners in the summer 2021, many local miners just brought their equipment over the border and continued to work in Kazakhstan, making it the second largest crypto mining hub.

Authorities propose measures against excessive mining

According to a report by Cambridge University, Kazakhstan’s share of global mining rose to more than 18 percent from just 1.4 percent back in 2019. It has been estimated that now around 250,000 mining devices is operating in the country, consuming great amounts of electricity.

On September 30, the energy minister of the country, Magzum Mirzagaliyev said that after arrival of miners, energy consumption rose 7 percent in a year, instead of usual 2 percent.

He suggested that the government makes restrictions of 1 MW per mining farm and 100 MW to this sector in general.

Miners met this suggestion with criticism, saying that the authorities should be cracking down on illegal miners rather than restrict those who are paying taxes.

On October 15, three major coal plants shut down and the national electricity provider KEGOC announced electricity rationing.