Analyst flags problems in Kazakhstan’s Bitcoin mining

From 2021 to 2023, Kazakhstan’s share of the global Bitcoin hashrate fell from 18% to 4%. This was stated by Jaran Mellerud, analyst at Hashrate Index and Luxor Technologies.

According to him, during 2020–2021 rapid industry growth was driven by cheap electricity, enormous demand for hosting, access to inexpensive Chinese equipment, as well as lax regulation and tax incentives. However, the rapid growth got out of control and Kazakhstan’s power grid could no longer meet miners’ demand of 1.5 GW.

“Since September 2021, the grid operator began rationing electricity, causing Bitcoin miners to experience difficulties,” Mellerud said in his report.

Nevertheless, the mining companies remaining in the country are optimistic following the recent enactment of a sector-specific law. It obliges miners to obtain licenses and operate only through approved crypto exchanges and pools, and it also introduces a tax on electricity.

“With the enactment of the sector-specific law, Kazakhstan’s mining industry is at a crossroads. Either the law provides a stable regulatory environment necessary for sustainable growth of the sector, or strict rules will finish what remains,” the analyst said.

He noted that Bitcoin mining in the country will not flourish until the electricity shortage problem is solved. Mellerud is convinced that substantial industry development can be guaranteed only by miners transitioning to their own generating capacity, including associated gas, wind and solar energy.

Another issue is the outflow of foreign capital amid the current macroeconomic environment.

“The sudden rise and fall of Kazakhstan’s mining industry proves that political risks always loom in the sector,” the expert added.

Bitcoin mining in Kazakhstan?? pic.twitter.com/b2erXe84DW

— Jaran Mellerud (@JMellerud) May 3, 2023

Mellerud believes that the described short-term difficulties will constrain the industry’s growth, but the long-term potential of mining in Kazakhstan remains enormous.

Earlier, ForkLog reported that miners in Kazakhstan paid $6.7 million in taxes for 2022.