According to a report by a local media outlet, Kazakhstan’s Minister of National Economy Alibek Kuantyrov wants to link the Bitcoin mining tax to the price of the underlying asset. In that way, the government official expects the country to benefit indirectly from future BTC price appreciation.
Kuantyrov had the following to say about the potential of this proposal:
We are considering an increase in the tax burden for miners, at this time we are also considering linking the tax rate for miners to the cost of cryptocurrency. If the cryptocurrency grows, it will be good for the budget.
The move appears to be part of a broader national strategy to scrutinize the expanding sector. Kazakhstan President Kassym-Jomart Tokayev appears to have ordered a tax increase for BTC mining by up to 10 times.
After China imposed a complete ban on Bitcoin mining, large operations were forced to find new homes. Scrambled, the miners moved to the US, parts of Europe, and China’s neighboring countries.
Many BTC miners moved to Kazakhstan due to its cheap energy, cold climate, and storage space for their hardware. However, Bitcoin mining operations have faced various obstacles such as political declaration and internet outages.
In a separate report for another local news outlet, Alan Dorjieve, head of the National Association of the Blockchain and Data Center Industry of Kazakhstan, clarified that the taxes would increase or decrease when the price of BTC reached a certain threshold. He explained:
A gradation is being considered; for example, up to $40,000 [the price of bitcoin] one tax, over $40,000 another tax, and so on. But it is still under discussion.
As new local media added, BTC miners in Kazakhstan were disconnected from the national power grid in January 2022. According to the government official, the miners are locked out of the network.
Will Kazakhstan Bitcoin Miners Change Their Luck?
The proposed tax on Bitcoin mining operations in this country could prove untenable for miners. However, it could be a short-term solution that allows these entities to come back online.
The country has gone from being a profitable investment for early BTC miners to an operational nightmare. According to Wired, in January 2022, most of the miners in Kazakhstan were lost.
Arcane Research data recorded up to $4.8 million in losses every hour these miners remained offline. There are about 90,000 mining rigs in the country, accounting for about 8% of Kazakhstan’s power capacity.
While it is true that the new tax could benefit the country, it could serve as the final nail in a series of events that could trigger another major BTC mining exodus. Whether the market will respond negatively to this event, as it did in 2021, remains to be seen.