Constant power cuts to Bitcoin miners in Kazakhstan have caused those who carry out this activity in the country to lose tens of millions of dollars.
Following the Chinese government's veto of trade and mining cryptocurrencies, , Bitcoin miners began to move to other, more friendly jurisdictions to carry out their activity.
Kazakhstan, located in Central Asia, promised to be the ideal destination for Bitcoin miners due to its proximity to China, its cheap energy, its continental climate and a seemingly favorable regulatory environment. All of this caused crypto mining farms to begin moving their equipment to relocate to Kazakhstan, making the country the second with the greatest Bitcoin computing power on its territory, after the United States.
However, the situation for Bitcoin miners has now changed dramatically in the country. The installation of thousands of mining rigs and an increase of almost 8% in energy demand in 2021 led the government to blame Bitcoin miners for the current energy crisis.
Energy and political crisis in Kazakhstan
In late 2021, the government of Kazakhstan began implementing strict measures against Bitcoin miners to control the energy crisis. The company that operates the country's power grid, KEGOC, began a series of power outages and interruptions to several mining farms, especially during peak hours. Added to this are the Internet service cuts that the government authorized in the midst of a political crisis that erupted earlier this year due to rising fuel prices.
According to the American publication Wired, the measures taken by the government have caused tens of millions of dollars in losses for crypto miners and a decline of at least 12% in the Bitcoin computing power installed in the country.
The government also significantly increased energy rates and authorized an additional tax for Bitcoin miners, which went into effect in January of this year.
Siege of illegal Bitcoin miners
Although the current president of Kazakhstan, Kassym-Jomart Tokayev, has promised to invest resources to encourage and promote Bitcoin mining in the country, the authorities are attacking all those facilities that do not have a license to operate legally.
In mid-March, the Financial Control Agency of Kazakhstan notified which had dismantled a total of 51 mining farms that were operating illegally, using the electrical grid without the proper permits and technical specifications or using third-party energy surpluses. In addition to this, another 55 crypto mining farms closed in the country voluntarily, given the state of uncertainty and threat.
As the agency's statement notes, Bitcoin miners completely suspended their operations, uninstalled their equipment and moved it from their premises. In total, 67.000 Bitcoin mining rigs were disconnected during the operations. The value of these mining rigs exceeded 100.000 billion tenge (more than $219,3 million today).
Energy, the challenge of crypto mining
The rise of crypto mining in Kazakhstan has highlighted the country's need to strengthen and optimize its energy infrastructure to meet the challenges posed by the mining and extraction of cryptocurrencies such as Bitcoin.
Today, Kazakhstan's Ministry of Energy continues to insist that Bitcoin miners are to blame for the energy overload and the current crisis. It also notes that due to the lack of regulation, this activity may become a risk to the country's economic stability.
The US and El Salvador are friendly to Bitcoin miners
Due to the situation, some miners continue to search for new jurisdictions where they can resume their area of activity.
Within this context, the United States remains the most dominant and attractive jurisdiction for crypto mining. According to data from the Bitcoin Energy Consumption Index from the University of Cambridge, the United States concentrates more than 42,7% of the computing power of the Bitcoin network.
States like Florida, Texas, and Wyoming are inviting Bitcoin miners to relocate to their territories. However, despite the US's appeal for cryptocurrency mining, Luxor Tech's vice president of business development Alex Brammer told Wired that it's not easy to find a suitable location in the country. Plus, the costs of moving and setting up are high.
On the other hand, El Salvador, the first country to make Bitcoin its legal tender, is one of the most cryptocurrency-mining-friendly countries. Its president, Nayib Bukele, is pushing a plan to support Bitcoin miners with geothermal energy from its volcanoes, ensuring an accessible, sustainable and efficient energy supply.
Continue reading: Cryptocurrency mining companies will have to report on their ecological footprint
