Kazakhstan is not the Promised Land for miners

After the Chinese ban on bitcoin mining, many miners from China settled in neighbouring Kazakhstan. The government’s low energy price and receptive attitude made it an attractive destination, but now that the miners are there, Kazakhstan does not appear to be the Promised Land that was hoped. Check this app to learn more about bitcoin trading.

For years, China was the number one destination for bitcoin miners. More than 60% of the hash rate (the bitcoin network’s computing power) came from the country. However, last year the Chinese government banned bitcoin mining and many mining companies were forced to look for housing elsewhere. As a result, many miners left for the United States, but neighbouring Kazakhstan also proved popular.

Kazakhstan has a low energy price, and the government seemed to welcome the miners, mainly because of the economic activity and extra tax revenue. As a result, in the months following the Chinese ban, Kazakhstan became the second most popular location for miners; Cambridge estimates that in August 2021, more than 18% of the global hash rate came from it.

Power failure in Kazakhstan

Still, Kazakhstan is not the mining paradise some miners might have hoped. Soon after the arrival of the miners, the Kazakhstan government announced new tax rules for bitcoin mining. That was probably in line with expectations.

Less expected was the overload of the power grid and the large-scale blackout in the summer. The summer heat and increase in air conditioning were mainly blamed, but the focus shifted to bitcoin mining after the summer. Since then, the attitude of the Kazakh government seems to have changed.

In October, the Kazakhstan Ministry of Energy limited the capacity that bitcoin miners may collectively consume to a maximum of 100 megawatts (MW) for the entire sector and a maximum of 1 MW per mining centre. That is very little for mining companies. Miners were also divided into ‘white’ miners with a permit and ‘grey’ miners without a permit. Grey miners risk being cut off from the power grid.

In the winter, the power grid was again under pressure. On January 24, a message followed from the grid operator that miners were cut off from the grid till the month-end. At about the same time, the authorities closed 13 illegal mining companies with a combined consumption of 202 MW. In February, there was a call from the president of Kazakhstan to raise the tax on bitcoin miners by 500%.

Mining Companies are moving again.

It is a bitter pill for the mining companies in Kazakhstan. However, several mining companies have already changed their plans, and many have started relocations again.

The publicly traded BIT Mining, for example, had started relocating to Kazakhstan. Still, those plans have been scrapped since February, and it is now focusing on expanding in the US instead. BitFuFu had already moved 80,000 ASICs to Kazakhstan but left them behind and purchased new equipment to mine in the US. Mining company Xive had been active in Kazakhstan for years but closed the doors of a mining centre in November and is now exploring other countries to settle, including the US.

Mining company Energix is ​​trying a different approach. They hope to work independently of the electricity grid to construct their hydroelectric power stations. Other major mining companies such as Genesis Mining and Canaan also had big plans in Kazakhstan, but it is still unknown if they have changed.

What is the United States’ approach in this subject?

It remains to be seen whether Kazakhstan will remain the second most popular country for bitcoin miners for much longer. However, with the changing business climate, the eyes of many miners seem to be once again on the US. 

Especially in US states like Texas and Wyoming, and cities like Miami, the door is wide open for bitcoin miners. In addition, senators regularly speak positively about bitcoin, and clear laws apply, making the political risk much lower than in Kazakhstan.

That would probably be more favourable for the climate. In Kazakhstan, people mainly burn oil and coal to generate energy, but according to reports, most bitcoin miners in the US use power generated from renewable energy sources.