Kazakhstan

According to the chairman, the central bank will decide on implementing its own digital currency by the end of 2022.

While Kazakhstan’s government is catching up with the tremendous volume of crypto mining in the country by introducing new taxes and regulations, the local central bank intends to explore the possibilities that crypto offers. 

On Tuesday, June 7 during the press conference the chairman of Kazakhstan’s National Bank Galymzhan Pirmatov stated that the nation aims to extract the profit from technologies the cryptocurrency market could provide. He emphasized the attractiveness of innovations and made reservations about the risks to macroeconomic stability. The official doesn’t think that the bank is late to the game:

“I don’t think that the National Bank is a latecomer. Like many other banks and financial regulators across the globe, we’re watching closely and researching the question.”

Pirmatov didn’t give away any details on the bank’s possible stance on crypto and warned that it is too early to speak about the legalization, although consultations with market participants are planned:

“The approach is very simple: we aren’t going to ignore this market. We want to extract the maximum profit from the innovative potential these technologies give us.”

Related: Bitcoin miners’ resilience to geopolitics: A healthy sign for the network

The executive also revealed some news about the central bank digital currency (CBDC) project of the National Bank. According to him, the bank still intends to announce its methodology on a digital tenge by the end of June. The final decision on implementing the CBDC will reportedly be made in accordance with that methodology before the end of the year.

On May 25, the Kazakh parliament passed amendments to the national tax code in the first reading. The amendments would tie a crypto mining tax tied to the electricity prices consumed by mining entities. One of the largest mining markets in the world, Kazakhstan generated as little as $1.5 million of state earnings from mining in Q1 2022. According to the State Revenue Committee of the Ministry of Finance’s report, a significant amount of the expected fees has not been received as the government had shut down a wide number of crypto mining firms to “ensure energy security.”

The gradual scale would impose the highest taxes on the cheapest electricity sources.

Kazakhstan, one of the global leaders in crypto mining with a recent history of hostile measures against the industry, is taking a step toward a comprehensive fiscal framework for mining operators. 

On Thursday, May 25, the lower chamber of Kazakh parliament, Mejlis, passed in the first reading the amendments to the national tax code, regulating the fiscal burden on crypto mining. These amendments suggest graded tax rates tied to the electricity prices consumed by mining entities.

For example, the cheapest grade of electricity prices, 5 to 10 tenges ($0,012–0,024) for Kwh, would come with an additional burden of 10 tenges ($0,024). For 10–15 tenges ($0,024–0,036) per Kwh, the tax would be 7 tenges ($0,017) and for 20–25 tenges ($0,048–0,060) per Kwh — 3 tenges ($0,0072).

Proposed amendments overstride the earlier initiative to raise the price for electricity from $0.0023 per Kwh to $0.01 for crypto miners, voiced by Kazakhstan’s First Vice Minister of Finance Marat Sultangaziyev back in February.

Further reading: Go green or die? Bitcoin miners aim for carbon neutrality by mining near data centers

The chamber indicated that the amendments are also aimed at creating a stimulus for using renewable sources of energy. In the case of green energy the tax would be only 1 tenge ($0,0024) without any regard to the electricity cost.

As Kazakh Economic Minister Alibek Kyantyrov stated, the measures are intended to “level the load and de-stimulate the consumption from private sources of energy”.

On April 29, the country’s Minister of Digital Development compelled digital mining businesses to provide information about electricity consumption and “technical specifications” for connection to the power grid 30 days before starting operations. Earlier, in March, 106 illicit crypto mining operations were shut down following raids by the Financial Monitoring Agency, which seized over 67,000 pieces of equipment at the time.