Kazakhstan Crypto Mining Clampdown Uncovers a Surprising Offender

Key Insights:

• The Kazakhstan government continues to target crypto miners.
• Soviet-era power infrastructure has forced the government to clamp down on “Gray miners.”
• Options for miners are becoming limited as fuel prices surge and governments scrutinize PoW mining.

The world’s second-largest Bitcoin (BTC) miner has had plenty of attention this year. According to Cambridge Centre for Alternative Finance, Kazakhstan accounted for 18.1% of Bitcoin’s global hashrate in August, sitting behind the U.S.

Since the start of the year, focus on crypto mining and Bitcoin mining, in particular, has surged. An energy crisis, surging fuel prices, and rising debate over the impact of Proof-of-Work mining on the environment have fueled increased government and regulatory scrutiny.

Kazakhstan Government Takes Aim at Crypto Miners

Recently, news reports of the Kazakhstan government clamping down on crypto mining have flooded the crypto news wires.

On Tuesday, the Kazakhstan government announced the closures of 106 miners. The government forced 51 mines to shut, while 55 mines voluntarily closed.

Investigations into the illegal mining operations reportedly surfaced some surprising political and business figureheads.

Former President Nursultan Nazarbayev’s brother, Bolat Nazarbayev, the chairman of Central Asian Electric Power Corp., Alexander Klebanov, and Kairat Itegmenov, the country’s seventeenth richest man, were among the names.

Since 2021, Central Asian Electric Power Corp. has reportedly faced electricity shortages. The government attributed some of the shortages to the arrival of crypto miners following China’s blanket ban on crypto mining.

The government may not have anticipated the chairman of Central Asian Electric Power Corp. to be involved, particularly when considering the current energy crisis.

This month’s clampdown follows failed attempts to drive away miners by other means.

In February, the Kazakhstan government considered imposing a 500% tax on Bitcoin miners. The government plan was to target unregistered miners known as “Gray Miners.”

February’s threat followed a reported power outage that left southern Kazakhstan in a blackout. It is worth noting that the blackouts are not reportedly a result of miners but due to the archaic Soviet-era power infrastructure.

Negative sentiment towards crypto miners is forcing miners to relocate once more. With the Chinese government targeting crypto miners in recent weeks and the U.S government looking closely at Proof-of-Work mining, not to mention its distance from Kazakhstan, options are limited.

EU Stance on Proof-of-Work Mining May Lure Crypto Miners

On Monday, EU lawmakers voted on the EU’s crypto regulatory framework, Markets in Crypto Assets (MiCA).

Lawmakers went against banning Proof-of-Work mining, which would have resulted in the ban of Bitcoin (BTC) and Ethereum (ETH).

The door is ajar for Proof-of-Work miners to consider the EU in place of Kazakhstan. For miners, the main issue will be the surge in energy prices across the EU. Russia’s invasion of Ukraine has added further pressure on energy prices. Near-term, even EU member states may prove to be too costly.