Kazakhstan’s sudden rise to third place in the cryptocurrency mining industry, behind the United States and China, has not gone unnoticed. the grid, which has prompted companies to relocate en masse to the neighboring Central Asian nation, drawn in part by cheap electricity tariffs.
A Cambridge University study released July 15 by the Cambridge Center for Alternative Finance showed that China’s share in global bitcoin mining recently fell to 46%, from 75.5% in September 2019 This propelled Kazakhstan to the rank of third player in bitcoin. mining, with many companies fleeing primarily to Kazakhstan to live beyond Beijing’s crackdown.
Among those who fled was one of China’s largest miners, BIT Mining. The company delivered its first batch of 320 mining machines to Kazakhstan after its operations in China’s Sichuan province were suspended in June. In July, BIT Mining purchased an additional 2,500 machines worth approximately $ 6.6 million for deployment in its data center in Kazakhstan to expand the company’s notional hash rate capacity from 165 PH / s.
Many other transactions in the Kazakh crypto mining sector took place between June and July.
Chinese company Canaan, one of the world’s largest manufacturers of cryptocurrency mining machines, especially ASIC mining machines that work by solving the complex mathematical equations needed to confirm blockchain network transactions, said in June that it had set up a base of operations in the former Soviet state. The company decided to start its own bitcoin mining operation in an effort to branch out from its mining rig sales business as demand fell due to a downturn in the crypto markets.
ENERGIX, already present in Kazakhstan before Chinese companies began their migration, signed an agreement with Hong Kong-based crypto-mining hardware company Bitmain to host Bitmain’s Antminer S19 Pro machines in the data center of ENERGIX based in Kazakhstan, a giant installation with a capacity of 180 MW. . The installation was commissioned in 2020 and currently ranks third among ENERGIX installations. ENERGIX has also signed an agreement with Wattum, an American crypto mining company. As part of the deal, Wattum will build a $ 2 million 16 MW cryptocurrency mining farm in Kazakhstan managed by ENERGIX.
In August, Shanghai-based The9 signed a joint venture agreement with Kazakh cryptocurrency mining company KazDigital to build a 100 MW capacity crypto mining site in Kazakhstan. The9 said it would initially transport 1,000 mining machines to Kazakhstan for a test operation. In the same month, The9 signed another joint venture agreement for the development of cryptocurrency mining sites with a total capacity of 200 MW. The agreement was signed by the company’s NBTC subsidiary with LGHSTR of Kazakhstan. Sites could deploy over 50,000 Antminers S19s and accommodate around 5EH / s of hash power.
China’s Taoping, a provider of blockchain technology and smart cloud services, announced in August that its wholly-owned subsidiary Taoping Digital Assets (Asia) Limited (TDAA) and a Kazakh company Aral Petroleum Capital (APC) had signed a memorandum of understanding. agreement (MoU) to establish a joint venture in Kazakhstan. The joint venture plans to invest and build cryptocurrency mining sites with a total capacity of 100 MW. It will then ensure the operation and maintenance of cryptocurrency mining machines in Kazakhstan.
This massive movement of Chinese miners in Kazakhstan appears to be accompanied by support from the Kazakh government contrary to the skepticism expressed by the Kazakh central bank towards digital currencies just a few years ago.
Cooperation with local banks
The Kazakh Association of Blockchain and Data Center Industries revealed in July that registered crypto exchanges in the country will need to start working with local banks to make it easier for Kazakh customers to access cryptocurrencies, namely the bitcoin (BTC). The Astana International Financial Center (AIFC), which authorizes crypto exchanges operating in Kazakhstan, has already started a pilot project with banks to explore a potential implementation.
The new scheme requires a centralized crypto bank account registered with the AIFC (banking wallet) to access crypto exchanges. The authorities consider that cryptocurrency users can rely on this account to buy and sell cryptocurrencies and perform transfers as well as other transactions in the forex market.
The new bank accounts will also be able to receive fiat currency linked to a source of income, with the bank acting as a central intermediary for all transactions.
These new requirements, however, may not work in favor of crypto users, who may prefer to avoid having to deal with banks when accessing crypto exchanges.
Electricity price regulation
Kazakh President Kassym-Jomart Tokayev signed a law imposing an additional charge for electricity used by cryptocurrency miners in Kazakhstan. As a result, crypto-mining entities will have to pay more than other electricity consumers in Kazakhstan because of the new surcharge for the electrical energy they burn.
The bill introduces a new royalty of 1 Kazakhstani tenge ($ 0.0023) per kilowatt hour used by cryptocurrency miners. The new tariff will be imposed from January 1, 2022. KWh prices in Kazakhstan currently average around $ 0.05, compared to $ 0.09 and above in Russia, China and the United States.
The bill appears in part to be an attempt to address concerns that Kazakhstan may fail to meet its commitments under the Paris Agreement to reduce greenhouse gas emissions by 15% by 2030. The exodus of Chinese companies to its Central Asian neighbor augurs rapid growth in the volumes of electricity needed for crypto mining – a prospect made worse by Kazakhstan’s heavy reliance on power plants coal to generate electricity.
On the market side, the introduction of the new tax has been strongly criticized by industry representatives.
Forbes Kazakhstan quoted Kazakhstan Blockchain Industry and Data Center Association chairman Alan Dordzhiyev in August as saying the new tax would likely lead to an outflow of foreign investors and an annual loss of about KZT 10 billion ($ 23.5 million). ) tenge. The head of the association expressed concern that instead of an additional estimated KZT 4.4 billion, Kazakhstan’s budget would only receive KZT 2 billion in two years, and that this figure would drop to zero in subsequent years.
This puts the country at a standstill, as its low share of renewable energy sources in power generation and the need for substantial investment in renewables precludes any possibility of a short-term switch to eco-friendly crypto mining. ‘environment.