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Kazakhstan Takes Aim at Bitcoin (BTC) Miners with Talk of 500% Tax

By:
Bob Mason
Updated: Feb 8, 2022, 13:34 GMT+00:00

A continued energy crisis in Eastern Europe sees the Kazakhstan government target Bitcoin (BTC) miners. Increased scrutiny could limit alternatives.

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Bitcoin (BTC) mining has had plenty of airtime on the crypto news wires in recent months. Key areas of focus have been an ongoing energy crisis across Eastern Europe and increased regulatory scrutiny.

Russia and the CIS have not been far from the news as regulators from around the world look to deliver a global crypto regulatory framework.

At the turn of the year, the Kosovo government imposed an outright ban on crypto mining blaming the ban on an energy crisis. The Kosovo government has not been alone, however, with the Georgian government also forcing citizens to vow not to mine cryptos.

For miners from Kazakhstan, things have not been much better. In early January, a countrywide internet blackout impacted Bitcoin miners. Protests had spilled into the streets after the government removed a cap on fuel prices.

From a Bitcoin mining perspective, both Kosovo and Georgia accounted for very little of Bitcoin’s global hashrate. This was a different story for Kazakhstan, however, which was the world’s 2nd largest Bitcoin mining nation behind the U.S.

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Bitcoin Mining and the Environment Become the Next Big Issues for Miners

Since China’s ban on Bitcoin mining in the summer of 2021, governments and regulators have been slow to react.

In fact, the U.S government held back from any fact-finding missions until last month. Since a U.S Congress subcommittee hearing on Bitcoin mining and the impact on the environment, there has been increased scrutiny from other governments, however.

Late last month, Russia’s The Bank of Russia proposed a blanket ban on crypto mining. The call for a ban coincided with calls from the EU for a ban on Proof-of-Work (PoW) crypto mining.

While actual blanket bans have been few and far between, governments have looked to tax Bitcoin miners as a deterrent.

Earlier this month, we reported on news of the U.S tax authorities favoring Proof-of-Stake (PoS) mining over Proof-of-Work protocols. The news had followed the U.S subcommittee hearing that leaned heavily in favor of PoS mining over PoW mining.

Contradictory Bitcoin Mining Stats Question Environmental Impact

Statistics from the U.S government, Fitch Ratings, and independent researchers including the University of Cambridge have painted a bleak image of Bitcoin miners. In fact, the statistics are so different that there could be question marks over the validity of both sets of numbers.

Amidst all the anti-Bitcoin mining chatter CoinShares published a paper looking into the impact of Bitcoin mining on the environment. Without going into the numbers from both sides, CoinShares did provide some useful comparable numbers that governments will need to research into. These include:

  • The U.S and China had emitted 5,830 Mt and 11,580 Mt in 2016 respectively.
  • Emissions estimates for minting and printing fiat currency sit at approximately 8 Mt of CO2 emissions per year.
  • The gold industry is estimated to generate between 100 and 145 Mt of CO2 emissions annually.
  • For the global banking system, power usage estimates sit at 264 TWh (2019). This translates to 130 Mt of CO2 emissions each year.

Bitcoin mining network emitted 36 Mt of CO2 in 2020 and 39 Mt in 2021. This accounts for less than 0.08% of a global total 49,360 Mt CO2 emissions.

Amidst the Confusion Comes a Price as Energy Prices Continue to Rising

When considering numbers thrown around by a number of governments, it is not surprising that other governments have responded.

This week, the Kazakhstan government reportedly considered a 500% tax on Bitcoin miners.

The idea followed chatter from members of the Kazakhstan government on hitting unregistered crypto miners knowns as “Gray miners”. Limited electricity has impacted the world’s 2nd largest Bitcoin mining nation.

An introduction of punitive mining taxes will undoubtedly force miners to relocate. With neighboring states and countries beyond taking an anti-Bitcoin mining stance, however, the U.S could also prove to be a costly move as the U.S government looks to hit Proof-of-Work miners.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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