Last year, Kazakhstan’s government collected about $7 million in taxes from cryptocurrency mining companies.
According to reports local media, Kazakhstan received 3.07 billion tenge (almost $6.9 million) in tax payments from cryptocurrency miners in 2022, the State Revenue Committee of the country’s Ministry of Finance announced.
The mining fee comes after the country introduced a surcharge of 1 tenge ($0.0023) per kWh last January as a way to legalize mining operations.
Meanwhile, official government figures show the country has collected 240 million tenge, more than US$541,000, in mining fees as of April 27.
The figures represent a sharp decline from the same period last year, when Kazakhstan collected 652 million tenge (approximately US$1.5 million) in fees in the first quarter of 2022 alone.
According to the Cambridge Center for Alternative Finance, Kazakhstan has become one of the top Bitcoin mining centers worldwide, ranking third in the world in terms of average Bitcoin Hashrate Contribution.
As of January 2022, the Central Asian country contributed 13.22% of the total Bitcoin hashrate, behind the United States (37.84%) and China (21.11%).
However, the introduction of cryptocurrency mining taxes, which were based on the electricity consumption of mining companies, has raised some concerns about the future of cryptocurrency mining in the country.
The taxation rules came into effect after growing public outrage in Kazakhstan over the use of the national power grid by undertaxed cryptominers.
Kazakhstan offers asylum to displaced Chinese miners
In 2021, a wave of foreign mining operators moved to Kazakhstan after China announced a blanket ban on all cryptocurrency-related transactions as well as cryptocurrency mining operations.
By November 2021, more than 87,849 rigs have been delivered to the territory following the mass exodus of miners from China, according to some estimates.
Rising demand has even put pressure on Kazakhstan’s power grid, causing power outages in towns and villages in many regions of the country.
With that in mind, the government has promised to reduce demand on the grid by turning off electricity to miners and seeking additional sources of supply from its eastern neighbor, Russian energy company Inter-RAO, based in Moscow.
The government recently announced plans to introduce new regulations on cryptocurrencies to curb tax fraud and illegal business operations.
One of the proposed regulations would require government approval of issuers of secure digital assets, while another would require miners to sell at least 75% of the cryptocurrency earned through registered exchanges. These new rules are expected to reduce tax evasion and improve governance.
Notably, some analysts believe that the share of Bitcoin mining in Kazakhstan has declined over the past year due to erratic power supply and regulatory uncertainty.
As of May, Kazakhstan’s share had fallen to just 4% from a peak of 18% in October 2021, according to Norway-based industry analyst Jaran Mellerud.