The Strategist

Cryptocurrency miners may wind down operations in Kazakhstan

01/10/2022 - 07:27

After the internet shutdown in Kazakhstan and the adoption of laws against cryptocurrency mining, an exodus of miners from the country could begin.

Cryptocurrency miners who migrated to Kazakhstan after a ban on mining in China may shut down their operations in the country after protests blocked the Internet and, consequently, up to 15 percent of the global Bitcoin network, CNBC reported.

The internet shutdown in Kazakhstan, the world's second-largest cryptocurrency mining hub, was another blow to miners looking for a place to operate sustainably after a ban on mining in China. 

When Beijing kicked out all its Bitcoin miners in May 2021, Kazakhstan seemed a logical destination for them. Kazakhstan's coal mines provide cheap electricity, which was one of the incentives for miners to migrate from China to the Central Asian country. 

As CNBC notes, the Kazakh internet blackout episode confirmed that the bitcoin network has a high degree of resilience, capable of surviving the sudden offline transition of a significant number of miners. Miners looking to avoid disruption for the future are now likely to migrate from Kazakhstan to the US, which last year became the world's largest Bitcoin mining hub. According to the Cambridge Centre for Alternative Finance Research, Kazakhstan lags behind the US in terms of global Bitcoin mining market share, with 18.1 per cent of all crypto-mining.

Kazakh lawmakers have established new rules to discourage mining. They include a law on additional taxes for crypto miners starting in 2022.