Hunger for crypto in Kazakhstan: to Bitcoin or not to Bitcoin? – Technology

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Recently the definition of mining has radically changed to something else. Today, when people hear mining, they don’t think of an ore and mineral extraction, but of a complex process performed by powerful computers that solve compound mathematical calculating equations. Bitcoin, Ethereum, Ripple, and even cryptocurrencies based on memes like Dogecoin are widely discussed in private jets and dinner parties of elite businessmen.

Some people may ask the question: How does a third world country connect to complex computers and a billion dollar cryptocurrency trend? The answer is simple. A mix of cheap electricity and allegiance to lawmakers attracts big players from Western countries who have already sharpened their teeth for a new cash cow.

Currently, there are 20 crypto farms in Kazakhstan. China has officially banned the use and mining of cryptocurrency. Chinese miners are fleeing the sunken ship to our landlocked country which can meet their needs. Thus, in July 2021, the Chinese bitcoin mining giant BIT Mining delivered its first batch of 320 machines to Kazakhstan. Executives of the company announced that the company’s operations in China have been suspended. The company plans to deliver 2,600 additional machines.

You might not believe it, but Kazakhstan positively holds fourth place in the global mining race. It only grants Russia, China and the USA the computing power to validate Bitcoin blockchains. But it does not concede in the cost of electricity. At a cost of around USD 0.03-0.04 per kWh (depending on USD to KZT exchange rates), electricity tariffs in Kazakhstan are among the cheapest in the world. Meanwhile, Kazakhstan’s crypto-mining rivals accuse:

USD 0.06 per kWh in Russia; $ 0.08 per kWh in China; and US $ 0.09-0.12 per kWh in the United States.

Additionally, unlike China, Kazakhstan’s laws do not exactly prohibit mining cryptocurrency. In support of the above, on June 25, 2020, the President of Kazakhstan, Kassym-Jomart Tokayev, signed a law that introduced changes to the regulation of digital technologies that officially legalize crypto mining in Kazakhstan.

Additionally, on June 25, 2021, President Tokayev proved that he plans to allow crypto mining in Kazakhstan by introducing a new tax in the Tax Code of the Republic of Kazakhstan. This amendment, which provides for a charge of one tenge per 1 kW / h for minors, will come into force as of January 1, 2022.

We also want to point out that not too long ago Mr. Almighty Tweets dropped the price of Bitcoin from over US $ 60,000 to US $ 32,000. All he needed to say that Bitcoin is not sustainable and his company will not accept Bitcoin payments, he also added that he will wait until Bitcoin is “green”.

Although his statement may become a blessing for Kazakhstan, since the “green economy” is developing rapidly here. Not only political stability and low cost of electricity make crypto mining so attractive in Kazakhstan, but also Kazakhstan’s approach towards green economy. On May 26, 2021, President of Kazakhstan Kassym-Zhomart Tokayev held a meeting where he identified key points for the development of renewable energy sources in Kazakhstan. The President stressed that the renewable energy sector in Kazakhstan is developing rapidly and there is a need to adopt a set of incentives aimed at the sustainable development of the renewable energy sector. He also indicated that the share of renewable energy sources in electricity production is expected to reach 15% by 2030.

Besides all the factors mentioned above that make Kazakhstan so attractive to crypto miners, there are also other points we want to highlight:

relatively easy creation of a new legal entity in Kazakhstan; legal framework provided by the state; presence of Astana International Financial Center and Astana Hub; attractive tax regime; political stability; approach to green economy low electricity prices.

There are also many other factors that crypto mining companies may find attractive. Our law firm, Unicase will help you undertake crypto mining projects and mitigate your legal and tax risks. We have been assisting crypto mining companies in their day-to-day business processes since 2019. Currently, we are supporting four companies that have connected to crypto mining in Kazakhstan. Our firm will be happy to share our experience and help you in your day-to-day operations.

Footnotes

1. https://bitcoinmagazine.com/business/bit-mining-moves-to-kazakhstan

2. https://online.zakon.kz/Document/?doc_id=32772963#pos=4;-52

3. https://kapital.kz/finance/96749/kakiye-izmeneniya-vneseny-v-nalogovyy-kodeks.html

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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