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In May and June, China's boycott of cryptocurrency mining and trading activities, led by Bitcoin, brought its western neighbor Kazakhstan a long-awaited opportunity.
For Chinese miners, Kazakhstan is not far away, so it is relatively easy to relocate mining equipment and operations. A large portion of China’s Bitcoin mining (about 36%) takes place in Xinjiang Province in western China, which borders Kazakhstan.
Now, Kazakhstan has also taken new actions regarding cryptocurrency mining.
Start taxing electricity consumption
Kazakh President Kassym-Jomart Tokayev signed a new law this week on July 1, amending the Central Asian republic’s legislation on “payment of taxes and other budgetary obligations” to impose additional charges on electricity used in the energy-intensive industry of cryptocurrency mining.
It is reported that the bill was voted through by the Senate in early June, and cryptocurrency miners need to pay an additional fee of about US$0.0023 (RMB 0.015) for each kilowatt of electricity used. Once the law is passed, it will take effect on January 1, 2022.
According to the draft, Kazakhstan’s regulation of the mining industry is aimed at obtaining additional financial resources for the state budget and preventing electricity consumption from uncontrolled mining farms.
In fact, since 2020, the Kazakhstan Ministry of Economy has proposed a plan to impose a 15% tax on cryptocurrency mining and plans to formulate new electricity price rules for cryptocurrency mining.
Analysts say the country’s electricity prices remain low and have not stopped cryptocurrency miners from mining in Kazakhstan.
Kazakhstan's electricity is mainly thermal power, and the cost is basically stable throughout the year. According to the research of Riarating, a research center under Russian News Agency, Kazakhstan ranks first in the list of cheap residential electricity in Europe. According to globalpetrolprices data, in September 2020, Kazakhstan's residential electricity consumption was US$0.041/kWh and commercial electricity consumption was US$0.052/kWh. According to the content of the forum, a mine in Kazakhstan provides electricity at 0.22 yuan/kWh.
Kazakhstan
In addition to relatively cheap and stable electricity resources, regulation and taxation also mean the legalization of crypto mining in Kazakhstan, which is more attractive to both local and foreign participants. At the same time, with China's stricter regulation of Bitcoin mines and the rise of miners' overseas movement, Kazakhstan has become a "hot spot" in the eyes of miners.
Recently, Canaan Technology has officially launched its own mining business in Kazakhstan, and the first batch of Avalon mining machines have been put into operation. Not long ago, Canaan Technology established its first overseas after-sales service center in Kazakhstan. The center will help provide after-sales services to local customers, such as machine testing and maintenance, warranty services and technical consultation.
On May 24, 2021, BitMining (formerly 500.com) announced that it had signed a legally binding investment agreement with a Kazakhstan company, and the two parties will jointly invest in the construction of a mining farm in Kazakhstan. The company plans to invest a total of 60 million RMB (about 9.33 million USD) to build and operate a mining farm with a load of 100 MW with its partners. Subsequently, on June 22, Bitcoin mining giant BITMining announced that it had successfully delivered its first batch of 320 mining machines to Kazakhstan, with a total computing power of about 18.2PH/s, and the first batch of mining machines will be put into operation on June 27. The company said that it expects to deliver the second and third batches of 2,600 mining machines again before July 1, with a theoretical maximum total computing power capacity of 102.3PH/s, and to ship its remaining mining machines to overseas data centers in the next few quarters.
On October 25, 2020, ViaBTC Pool announced a global strategic partnership with overseas mining farm Enegix to expand into Kazakhstan. Due to its early deployment in overseas markets, ViaBTC Pool has performed significantly better than other mining pools in this epic process of Bitcoin decentralization.
In addition, some American institutions have also taken a fancy to Kazakhstan. On June 17, Wattum, an American cryptocurrency consulting and mining company, signed an agreement to acquire a crypto mining farm operated by Energix, an Israeli renewable energy power producer in Kazakhstan. The two companies will build a mining facility to provide 16 megawatts of energy for mining machines and pledged to invest $2 million in the joint venture. Wattum and Energix are also negotiating another 50-megawatt mining farm at a cost of $8 million.
Power problems remain
Despite the bold attempts of leading mining companies such as Canaan Technology and BitMining, and the natural low temperature climate saving a lot of electricity costs for mining operations, miners still need to pay close attention to Kazakhstan's electricity problems.
On February 12 this year, Zumangarin, director of the Kazakhstan Agency for the Protection and Development of Competition, publicly stated that Kazakhstan currently has an oversupply of electricity, with annual power generation reaching 106 billion kWh and electricity consumption of about 105 billion kWh in 2020. However, experts predict that Kazakhstan will face power shortages and insufficient power generation capacity in the next 2-3 years.
Public data shows that most of Kazakhstan's power equipment was put into use in the 1960s and 1970s. By the end of 2020, the depreciation rate of these equipment was 53%. The main cost of power plants is to maintain the normal operation of equipment, and the profit level of most power plants is lower than the actual cost. Due to insufficient funds, the number of accidents and technical interruptions has increased.
According to Xinhuanet in May this year, Kazakhstan's electricity production structure and supply-demand imbalance are prominent. On the one hand, coal-fired power plants dominate Kazakhstan's electricity production, with thermal power accounting for more than 80% of total power generation. On the other hand, since coal mines are concentrated in northern Kazakhstan, the northern region accounts for 70% of the country's total power generation; while most of the population is concentrated in the southern region, and the power consumption of southern cities accounts for about 70% of the country's total, which needs to be transported from the north over long distances.
Currently, Kazakhstan has a total of 155 power stations, of which 69% are coal-fired power stations and 9% are hydropower stations. Kazakhstan has considerable reserves of renewable energy and is actively developing it. According to government planning, by 2025, the proportion of renewable energy in electricity generation will increase from the current 3% to 6%, reach 10% in 2030, and further increase to 50% in 2050.
Although miners are increasingly turning their attention to Kazakhstan, whether it is the transportation of mining machines, the construction of mining sites, or electricity cooperation, every step needs to be carefully considered, and miners still have a long way to go before they can go overseas. (Golden Finance) |
