Kazakhstan Gets Tough On Bitcoin Mining Again

Updated: 11 February 2023

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The world’s second-largest Bitcoin mining country, Kazakhstan, has tightened the reins on Bitcoin mining by releasing new regulations to prevent tax evasion and illegal business activity.

The President, Kassym-Jomart Tokayev, signed the new set of laws that emphasized the country’s resistance to illegal mining activities and the issuance of digital assets. They are targeted at establishing grounds for the development of the crypto business and fair competition among market players. The newly signed law addressed two main matters, the issuance and circulation of digital assets and the sale of digital assets.

Additionally, the digital asset law, which was brought to parliament in late January, outlines the authority of governmental entities in charge of the industry and introduces licensing for crypto miners and exchanges, substituting the present registration system.

On the issuance, the new regulations provide that issuers of digital assets need to operate with permission that is granted by the Astana International Financial Center (AIFC) on behalf of the government. In addition to that, the issuers of these digital assets will be subject to financial monitoring as provided by the law as a way to counter financial terrorism or money laundering activities. This legislation will be enacted from April 1, 2023

Regarding the sale of digital assets accrued from digital mining activities in the country, the new regulations require that at least 75% of the assets be sold through digital asset exchanges licensed by the AIFC. This will enable the government and authorities to track the income of digital miners and digital mining pools for tax purposes and aid in reducing cases of tax evasion. This section of the new regulations will be in force from January 1, 2024, to January 1, 2025.

The laws also stipulate that mining licenses will be granted for a period of three years based on two categories. The first is a digital miner who owns or otherwise legally owns a digital mining data center that meets certain standards in terms of equipment, location, and security. The second is a digital miner who does not own a digital mining data center and carries out digital mining with his own mining hardware and software in a rented space in a digital mining data center.

New laws on energy consumption

Among the many reasons why the Bitcoin migration occurred, one of the main reasons the miners moved to Kazakhstan was due to the availability of cheap and subsidized electricity. This led to an influx of miners in the country which translated to enormous power being directed to mining activities. The Central Asian country’s officials have since blamed the rising energy shortage on the miners resulting in temporarily disconnecting registered facilities and closing down illegal firms so as to balance energy consumption.

Since the year began, crypto miners have been subjected to a surcharge on their energy consumption bills. The rates were calculated on a progressive scale based on the amount and source of energy they utilize in their mining activities hence the more power you use, the more your rates, and the more sustainable your energy source, the lower your rates.

The new law permits miners to consume power from the national grid only when there is a surplus, thereby limiting the industry’s energy use. The surplus will be divided among licensed operators who will be allowed to bid on the electricity. This restriction will not apply to miners that use renewable energy, imported power, or their own energy-producing capacity that is not connected to the grid.