New high tax rate on crypto miners in Kazakhstan, here’s why

Kazakhstan has introduced new tax rules for crypto miners, this new tax system will differentiate the tax rates on crypto mining. It also includes crypto miners who use renewable energy resources. Kazakh President Kassym-Jomart Tokayev has signed this law, which will be amended into the country’s tax law.

The tax amount should be related to the amount and average price of electricity that miners consume during the extraction of cryptocurrencies such as Bitcoin. There have been constant attempts to regulate crypto-mining activities including Bitcoin and other cryptocurrencies in Kazakhstan.

With the new law, it seeks to amend the current law “On taxes and other mandatory payments to the budget” together with the supplementary law that will improve the establishment of the tax law. This new law imposed on crypto miners comes after the Central Asian country’s depressed crypto miners.

Crypto mining is a competitive field, and it uses the proof-of-work method (consensus mechanism). Through this method, it performs verification and adds a new transaction to the blockchain. Apparently, the tariffs for electricity consumption in Kazakhstan start from as low as 1 KZT (0.0021 USD) per kilowatt-hour.

Crypto Mining Tax depends on the type of energy source used

The tax amount as mentioned above will first and foremost depend on the average price of electricity consumed to characterize the digital asset within a specific tax period. The taxes start from 1 Kazakhstani tenge per kilowatt-hour (kWh).

The tax will also be calculated depending on the source the energy is generated from. Miners who use renewable sources must pay the lowest tax rate of 1 tonne per kWh, regardless of cost.

An additional fee was also introduced on 1 January this year, this was done after the country witnessed an increased power deficit the year before. The deficit in power was attributed to the increased number of miners in the country after the Chinese attack on the industry last year.

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Energy crisis and the change in treatment against crypto mining

The climate in Kazakhstan together with resources such as coal mines make it favorable for crypto mining. The country previously accounted for 18.1% of the global hash rate, making it the second country with the highest number of miners. Many companies decided to start mining after China’s ban.

This led to increased load on the nation’s power grid. That was when the country began to impose restrictions on mining, along with this it also introduced restrictions on electricity supply during the winter months.

Due to this, many mining activities stopped in many regions. Some even decided to leave the country and choose other places for the extraction of coins.

Increased power on the power grid forced the president and other authorities to raise taxes after locating and identifying miners across the country.

Earlier this year, the state auditors began to take action against mining companies that tried to evade taxes and tried to profit from taxes that they would not benefit from at all.

The increase in the tax rates aims to reduce the electricity load on the electricity grid by counteracting the large consumption of electricity that was originally intended for household purposes.

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Featured image from The Astana Times, chart from TradingView.com