Power Deficit Drives Crypto Miners away from Kazakhstan

This year, Kazakhstan’s growing crypto mining industry has had to deal with electricity shortages. According to a media report, this shortage has driven some miners, including those who had moved to the region after the crackdown in China on the sector, to consider moving to some other destinations that have a more stable energy supply, such as the United States. Ever since China had initiated a crackdown against the crypto mining industry back in May, Kazakhstan had become a prominent hotspot for all mining activity. The electricity rates in the Central Asian nation are still capped and it also produces fossil fuels. 

However, the insufficient generation capacities of Kazakhstan and its neglected infrastructure has failed to meet the rapidly increasing demand for electricity, which is required for powering the crypto mining facilities. The growing deficit has been blamed by the authorities on the mushrooming mining data facilities. The first three quarters of 2021 alone saw the consumption of electricity go up by 7%. In fact, the lawmakers in Kazakhstan have gone as far as suggesting that higher electricity tariffs be introduced for crypto miners. Some representatives of the crypto mining industry in the country have complained about what they consider unfair treatment. 

Founder of Xive, a local crypto mining firm, Didar Bekbauov said that they have made crypto mining a scapegoat. The executive had stated so earlier in December on Twitter after his company had been forced to shut down its primary facility in South Kazakhstan because its power supply had been cut suddenly in the previous month. The company is still operating another mining farm in Kazakhstan, but at the same time, it is looking into shifting its operations to the United States. The Data Center Industry and Blockchain Association of the country and the grip operator in Kazakhstan, KEGOC, had reached an agreement in November for ensuring an uninterrupted supply of power to registered miners. 

However, mining companies were forced to shut down their facilities in Kazakhstan when the state-run operator was unable to fulfill its end of the deal. Bitfufu, which is backed by Bitmain, is another prominent crypto firm operator that has had to close down its crypto farms in Kazakhstan and has decided to move to the United States. Even though regulated crypto mining businesses have suffered because of the restrictions the power distribution company has imposed, small-scale crypto farms continue to operate and mint virtual currencies in garages and basements.

This is another challenge that the government in Nur-Sultan has to be deal with because these ‘gray miners’ are using a serious amount of electrical energy. The crypto industry association’s president, Alan Dorjiyev said that getting rid of these miners is very hard. Initially, the country had welcomed crypto miners and had even taken steps to regulate the sector via legislation. Estimates indicated that crypto-mining could bring in about $1.5 billion into the country’s economy within the next five years and tax revenue more than $300 million. They are also planning on building power plants for enhancing its generating capacity. 

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