Kazakhstan to Introduce Mining Tax Law By 2022
Regulatory pressures are now encroaching into the crypto mining industry, as Kazakhstan approves a law introducing mining tax by 2022. It seems there will be no respite for the cryptocurrency industry in the coming months as it relates to regulations. While the cryptocurrency industry has managed to survive the hostilities from various regulatory bodies, regulations on the mining industry may be a double blow to the crypto space leading to a further market crash worse than May’s. Kazakhstan became a choice for miners following China’s mining ban.
Kazakhstan Accounts for 4.5% of Global Bitcoin Mining
The Kazakhstan government revealed the latest development in an official notice, stating that the law will come into operation by 2022. Kazakhstan is responsible for 4.5% of global Bitcoin mining. The Central Asian country topped the list of countries Chinese miners were moving to after the ban in China. With the new law, it is a clear indication that harsh policies on mining are not over yet.
While the Kazakhstan government has claimed that the new legislation is necessary, most mining companies are lamenting against it, saying it could lead to a shutdown of mining operations in the country. Kazakhstan has been able to generate substantial revenue from electricity costs as this forms a large constituent of mining. Although the country boasts of cheap electricity, which was a major attraction for Chinese miners, mining companies remit power costs to the government.
Will Mining Difficulty Reduce Again?
Experts are worried as to what this bodes for the crypto mining industry. China’s mining ban led to an aftermath of the biggest reduction ever recorded in Bitcoin mining difficulty. The global hash rate dropped too, however, mining difficulty declined by 28%. Before the ban, China provided 65% of the mining capacity of the top crypto asset. Understandably, that figure has reduced as miners left the country in their numbers. Kazakhstan’s mining tax law could lead to a further decline in mining difficulty and hash rate. It was able to generate nearly 10 billion tenge in taxes last year.
Although the law is yet to be effective, miners may consider leaving the country for neighbouring countries like Uzbekistan or Iran. Iran has a mining tax in place already as well. So Uzbekistan may be a last resort for mining companies. Perhaps Texas and Miami could also come into the picture. Texas may be an attraction for them for its cheap energy and crypto-friendly laws while Miami boasts of cheap nuclear energy and possibly, tax concessions. The US contributes about 7% to mining while Russia 6%.
Cryptocurrency industry has been weathering a raging storm since the beginning of this year. The market finally capitulated in May which saw the third halving on Bitcoin and a -50% dip on most altcoins. Crypto exchanges have been on the radar of regulations as well. Last month, Canada and the UK shut down the operations of leading crypto exchange, Binance. South Korean also upped the ante on regulations compelling exchanges to liaise with banks on issuing real-name based accounts.
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