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Kyrgyzstan is slowly becoming a crypto mining favorite, as the tax revenue from mining experienced a significant surge in 2023.
Crypto Mining Surge In 2023
Kyrgyzstan, with its abundant and untapped hydroelectric potential, has become a hotspot for crypto-mining operations. The Finance Ministry reported a substantial increase in tax revenue from the crypto-mining industry, reaching 78.6 million soms, nearly $883,000, in the first 11 months of 2023 – an impressive surge compared to the previous year.
Throughout 2023, the tax revenue from cryptocurrency mining in Kyrgyzstan experienced significant volatility. February saw a low of 738,000 soms ($8,284), while August reached a peak of 11.6 million soms ($130,212). By November, tax receipts stabilized at 7.6 million soms ($85,767), following a decline from the August high. Notably, Kyrgyzstan currently has only one officially operating cryptocurrency mining company, although it once hosted a more extensive array of mining operations.
Straightforward Taxation System
Kyrgyzstan employs a straightforward taxation system for cryptocurrency mining. Miners are subject to a 10% tax rate on the cost of electricity, inclusive of value-added and sales taxes. This transparent and predictable tax structure not only provides clarity for miners but also contributes significantly to the government’s revenue stream. However, this taxation rate is still five times higher than what Kyrgyzstan’s general public pays.
Challenges and Opportunities
While the surge in tax revenue is positive, challenges and opportunities lie ahead. President Sadyr Japarov’s approval of a crypto mining facility at the Kambar-Ata-2 Hydro Power Plant in July 2023 is a step forward.
In 2023, cryptocurrency production faced hurdles due to low dam fill levels and delivery limitations from contracts with neighboring countries. Miners resorted to importing power, facing difficulties at times. Despite challenges, the industry consumed 17 million KWh of electricity by October 2023.
Future of Crypto Mining in Kyrgyzstan
Kyrgyzstan’s untapped hydroelectric capacity positions it as a potential mining hub. With vast water resources in glaciers, high-altitude lakes, and rivers exceeding 35,000 kilometers, the country relies primarily on hydropower sources for crypto-mining operations. The utilization of these resources, however, remains underdeveloped.
As the government adapts its regulatory framework and explores opportunities to harness its hydroelectric potential, the future of cryptocurrency mining in Kyrgyzstan remains an area of interest and potential growth. The industry’s resilience and the government’s proactive measures will play a crucial role in shaping this evolving landscape.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.