Amidst the ongoing struggles in the crypto market, Bitcoin mining companies worldwide are facing losses due to rising operational costs and market volatility. In Kazakhstan, the world’s third-largest Bitcoin mining market, mining operators have voiced concerns over high energy prices to President Kassym-Jomart Tokayev.
According to local media reports, eight major mining companies, including BCD Company, TT TECH Limited, KZ Systems, AI Solutions, Green Power Solution, VerCom, and Kinur Invest, have signed an open letter highlighting their distressful situation due to these high-energy costs.
All major players in the industry have suspended their operations and plan to shut down entirely in Kazakhstan by the end of the year. The executives attribute this crisis to the government’s decision to raise taxes on energy for crypto miners, which has led to the country losing its competitive position in the global crypto mining industry to countries like the United States, Russia, and China.
The tax law, introduced on January 1, 2022, is based on electricity consumption by mining entities and aims to address the issue of crypto miners using the national power grid without paying sufficient taxes. Even with the taxes, the cost of 1 kilowatt-hour (kWh) of electricity for miners in Kazakhstan is approximately $0.067, significantly lower than the average of $0.12 per kWh in the United States.
As reported by Todayq News on May 7, 2023, the Kazakh government collected around $7 million in tax payments from crypto-mining entities. However, if urgent measures are not taken, the letter warns that the digital mining industry in Kazakhstan could cease to exist.
However, in May 2023, the Biden administration proposed a 30% tax on cryptocurrency mining called the Digital Asset Mining Energy (DAME) excise tax to hold crypto companies accountable for their environmental impact, addressing issues like pollution, higher energy prices, and increased greenhouse gas emissions.
Despite these challenges, asset managers have shown increasing interest in the crypto-mining sector. A recent report by Todayq News has garnered significant attention, as asset manager BlackRock invested a substantial $411.4 million into crypto mining companies, signaling continued confidence in the industry’s long-term potential.