In 2022, the government of Kazakhstan received 3.07 billion tenge, approximately $7 million, in tax payments from crypto mining entities. This follows the implementation of an amended law regulating the fiscal burden of mining cryptocurrencies, according to local media reports. Preliminary data from the government for 2023 shows that mining fees collected by April 27 totaled 240 million tenge, worth over $541,000 at the time of writing. However, these figures are much lower than the 652 million tenge, approximately $1.5 million, in fees paid in the first quarter of 2022.
Kazakhstan ranks among the world’s top Bitcoin mining hubs. As of January 2022, the Central Asian country contributed to 13.22% of the total Bitcoin hash rate, just behind the United States (37.84%) and China (21.11%), according to data from Cambridge Centre for Alternative Finance.
The country introduced taxes on digital mining on January 1, 2022, based on electricity consumption by mining entities. The law came into effect amid growing national frustration with undertaxed usage of the national power grid by crypto miners. The amended legislation was also considered a legal path for further adoption amid tightening regulations around the world.
A wave of foreign mining operators relocated to Kazakhstan in 2021 during the last bull market, affecting already difficult relations between the country and miners. Some estimates indicate that more than 87,849 rigs have been brought to the territory by November 2021 following China’s crackdown on mining activities.
Recently, the government announced plans to introduce new crypto regulations to curb tax fraud and unlawful business operations. One of the proposals calls for a government approval for secured digital assets issuers, while another would require miners to sell at least 75% of crypto earned via registered exchanges. The move is expected to reduce tax evasion.
Kazakhstan’s efforts to regulate the crypto industry are in line with global trends. Many countries are exploring ways to regulate the crypto industry and ensure it complies with tax laws and other financial regulations.
Governments are concerned about the potential use of cryptocurrencies in illegal activities such as money laundering and terrorist financing. Therefore, regulations are being implemented to ensure transparency and prevent fraudulent activities. In some countries, such as China, crypto mining operations have been banned outright.
However, Kazakhstan has chosen a different approach and is using tax laws to regulate the industry. This approach is likely to be more effective in curbing tax fraud and illegal business operations.
Kazakhstan has shown a willingness to adapt to changing circumstances and take advantage of new opportunities. The country’s growing mining industry is a testament to its entrepreneurial spirit and commitment to innovation.
The introduction of crypto regulations is likely to benefit the country’s economy by increasing tax revenues and creating new job opportunities. It will also help to attract more foreign investors and miners, further boosting economic growth.
Overall, Kazakhstan’s efforts to regulate the crypto industry are a step in the right direction. By implementing tax laws and other regulations, the country can ensure that the industry operates legally and transparently, benefitting both the government and the private sector.