bne IntelliNews – How Kazakhstan shot to number three in the crypto mining industry

Kazakhstan’s sudden rise to third place in the cryptocurrency mining industry, trailing solely the US and China, didn’t go unnoticed—it was headline-making crackdowns on crypto mining in China, pushed by officers involved at the sheer volumes of electrical energy the industry sucks from the grid, that moved companies to relocate in droves to the neighbouring Central Asian nation, drawn in half by low-cost electrical energy charges.  

​​Cambridge University analysis revealed on July 15 by the Cambridge Centre for Alternative Finance confirmed that China’s share of worldwide bitcoin mining these days plunged to 46%, down from 75.5% in September 2019. This boosted Kazakhstan to the rating of third largest participant in bitcoin mining, with a number of companies primarily fleeing to Kazakhstan to stay on past Beijing’s crackdowns.

Those who fled included considered one of China’s largest miners, BIT Mining. The agency delivered its first batch of 320 mining machines to Kazakhstan following the suspension of its operations in the Chinese province of Sichuan in June. In July, BIT Mining purchased an extra 2,500 machines with a worth of round $6.6mn for deployment to its knowledge centre in Kazakhstan to develop the firm’s theoretical hash charge capability by 165 PH/s. 

A number of different offers in the Kazakh crypto mining sector befell inside the span of June and July.

Chinese agency Canaan, considered one of the world’s largest producers of cryptocurrency mining machines—particularly, ASIC mining machines that function by fixing the advanced mathematical equations wanted to verify blockchain community transactions—mentioned in June that it had arrange a base of operations in the ex-Soviet state. The agency has determined to set up its personal bitcoin mining operation in a bid to diversify away from its enterprise promoting mining rigs, as demand has slipped due to a downturn in crypto markets. 

ENERGIX, already current in Kazakhstan earlier than the Chinese companies started their migration, signed an agreement with Hong Kong-based crypto mining hardware company Bitmain to host Bitmain’s Antminer S19 Pro machines at ENERGIX’s Kazakhstan-based data centre, a giant facility with 180 MW of capacity. The facility was commissioned in 2020 and at present ranks as ENERGIX’s third largest facility. ENERGIX additionally signed a deal with Wattum, a US-based crypto mining company. Under the deal, Wattum will construct a $2mn 16-MW crypto foreign money mining farm in Kazakhstan run by ENERGIX.

In August, Shanghai-based The9 signed a three way partnership settlement with Kazakh cryptocurrency mining agency KazDigital to assemble a crypto mining web site with a capability of 100 MW in Kazakhstan. The9 mentioned it will initially transport 1,000 mining machines to Kazakhstan to lead a trial operation. In the identical month, The9 signed one other three way partnership deal for the growth of cryptocurrency mining websites with a complete capability of 200 MW—the deal was signed by the firm’s NBTC subsidiary with Kazakhstan’s LGHSTR. The websites might deploy greater than 50,000 S19 Antminers and accommodate about 5EH/s of hash energy. 

China’s Taoping, a supplier of blockchain expertise and sensible cloud companies, introduced in August that its wholly-owned subsidiary Taoping Digital Assets (Asia) Limited (TDAA) and a Kazakh agency Aral Petroleum Capital (APC) had signed a memorandum of understanding (MoU) to set up a three way partnership in Kazakhstan. The three way partnership plans to make investments and construct cryptocurrency mining websites with a complete capability of 100 MW. It will then perform the operation and upkeep of cryptocurrency mining machines in Kazakhstan.

This mass motion of Chinese miners into the Kazakhstan seems to be accompanied by Kazakh authorities help in distinction to the scepticism expressed by the Kazakh central financial institution in the direction of digital currencies just some years in the past.

Cooperation with native banks

The Kazakh Association of Blockchain and Data Center Industries revealed in July that crypto exchanges registered in the nation can be required to start working with native banks to facilitate Kazakh buyer entry to cryptocurrencies, particularly bitcoin (BTC). The Astana International Financial Center (AIFC), which licences crypto exchanges working in Kazakhstan, has already launched a pilot challenge with banks to discover potential implementation.

The new scheme requires a centralised and AIFC-registered crypto checking account (financial institution-held pockets) for gaining entry to crypto exchanges. The authorities see crypto customers as having the ability to depend on this account to purchase and promote cryptocurrency and conduct transfers together with finishing up different operations on the trade market.

New financial institution accounts will even have the ability to obtain fiat foreign money tied to an earnings supply with the financial institution performing as a centralised middleman for all transactions.

These new necessities, nevertheless, could not work in favour of crypto customers, who could want to bypass having to take care of banks when accessing crypto exchanges. 

Regulation of electrical energy costs

Kazakh President Kassym-Jomart Tokayev has signed a regulation imposing an extra charge for electrical energy utilised by cryptocurrency miners in Kazakhstan. As a end result, crypto mining entities can be required to pay greater than different energy shoppers in Kazakhstan due to the new surcharge for the electrical power they burn. 

The invoice introduces a brand new charge of 1 Kazakhstani tenge ($0.0023) per kilowatt-hour utilized by cryptocurrency miners. The new charge can be imposed ranging from 1 January 2022. Prices per kWh in Kazakhstan at present stand at a median of round $0.05, in contrast to $0.09 and above in Russia, China, and the US. 

The invoice partly seems to be an try to deal with issues that Kazakhstan could fail to uphold its commitments beneath the Paris Agreement to scale back greenhouse gasoline emissions by 15% by 2030. The exodus of Chinese companies to its Central Asian neighbour bodes fast development in volumes of electrical energy wanted for crypto mining—a prospect worsened by Kazakhstan’s very heavy reliance on coal-fired energy crops to generate electrical energy. 

On the market aspect, the introduction of the new tax was met with mass sharp criticism from industry representatives.

Forbes Kazakhstan in August cited the president of the Association of the Blockchain and Data Center Industry in Kazakhstan, Alan Dordzhiyev, as saying that the new tax can be seemingly to lead to an outflow of international traders and an annual lack of round KZT10bn ($23.5mn) tenge. The head of the affiliation expressed issues that as an alternative of an estimated further KZT4.4bn, Kazakhstan’s funds would obtain solely KZT2bn in two years, and that the determine would slide to zero in subsequent years. 

This locations the nation in a bind as its low share of renewable power sources in electrical energy manufacturing and the want for substantial investments in renewable power stop any risk of a brief-time period change into environmentally pleasant crypto mining.


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