The Kazakh government is presently working on increasing taxes on cryptocurrency mining to link the new tax rate to the value of the mined digital currency. According to the Minister of National Economy, Alibek Kuantyrov, establishing this mechanism will boost budget revenues.
Kazakhstan turns unfriendly towards Bitcoin miners with a new tax system
Previously, Kazakhstan stood as an attractive location for Chinese Bitcoin miners because of the country’s ban on any BTC mining activity. However, it now appears that the nation will implement new taxes that will severely harm the industry. According to Alibek Kudanov, the government team is developing a tax plan that would tie tax payments to the value of mined tokens.
According to Alibek, this will aid the country financially in tax revenue collection because it boosts the national budget. On the other hand, the choice might encourage many miners to seek mining opportunities abroad, such as in El Salvador.
“We are considering increasing the tax burden for miners; at the moment, we are also considering linking the tax rate for miners to the value of the cryptocurrency. If the cryptocurrency grows, it will be good for the budget,” Kuantyrov said.
If the government goes through with this plan, miners in Kazakhstan will see their taxes rise alongside the value of the digital assets they mine. Initially, the Kazakstan government embraced miners with open arms. However, the country’s attitude to miners has dramatically changed from what it was a few years ago.
The country went from being one of the cheapest energy sources in the world for mining to instituting a 20 cent per kWh mining tax in one month. The energy cost was multiplied by 10, suggesting that miner energy consumption had dramatically increased.
The high power usage of mining farms has been a driving force behind this tax. Kazakhstan’s infrastructure is struggling to keep up with the rapidly increasing demand for electricity, which officials attribute to data centers.
Aside from the tax, the government has also begun to close down many mining farms, turning the so-called paradise into a headache for Bitcoin mining. The country may also issue a levy on mining equipment. Mining firms will be required to disclose the number and kind of their coin mining equipment and pay the new charges quarterly.
The collapse of the local market has had a devastating impact on economies worldwide, causing many to fear, and Kazakhstan is no exception. Furthermore, several mining stations closed their doors due to government cutbacks in electricity supply to certain mines. The government claims that Bitcoin mining strains its energy infrastructure, resulting in widespread blackouts.
Kazakh government faces backlash from crypto supporters
Critics have described the government’s recent moves as a significant change from Kazakhstan’s previous approach to the cryptocurrency mining sector. In 2021, Kazakhstan became the world’s second-largest Bitcoin mining center (after the United States) due to tax incentives and low power costs.
Previously, the Kazakh government attempted to entice cryptocurrency investment. However, currently, the government stands in a different position. Following the new regulations, it’s no surprise that crypto industry experts have criticized these policies and rules.
Denis Rusinovich, the co-founder of Cryptocurrency Mining Group (CMG), a firm operating in Kazakhstan since 2017, stated that from one time to the next, “Kazakhstan went from being heroes to nothing,” thus blaming the government’s regulatory actions.
According to Alan Dorjiyev, a mining stakeholder in the country, there is no assurance on how the new taxes would be structured. Dorjiyev is the executive director of Kazakhstan’s National Association of Blockchain and Data Center Industry.
President Kassym-Jomart Tokayev, who ordered the agencies to raise taxation on space, has added to the uncertainty. Additionally, the President ordered its financial authorities to verify customs and tax documents from all mining enterprises in the country to ensure that they were following its tax rules.
At the moment, conducting mining operations in the nation may be somewhat counterproductive, given that another increase in power rates is possible at any time. All of this is bound to drive miners away from locations with more restrictive policies. Industry analysts say that the country’s high taxes will rapidly eliminate the bitcoin mining industry. Many miners have already departed in anticipation of these regulations.