New Regulations for Crypto Miners in Kazakhstan

The huge influx of bitcoin miners in Kazakhstan is causing the energy grid of the country to come apart at the seams. However, this just might be a blessing in disguise because the industry and government are looking for a solution that will not decimate the mining industry. The share of the global hashrate of the Central Asian country, which refers to the amount of computing power dedicated to bitcoin mining, has doubled since May. This was when Chinese bitcoin miners had begun to move their operation overseas after being banished from their own country. Now, electricity shortages are happening in Kazakhstan. 

This problem was hard to anticipate in the country because it is considered energy-rich and previously had excess electricity. The influx of miners has been cited as the reason for the energy shortages by the government. Therefore, KEGOC, which is the national grid operator, is now rationing the electricity given to mines and a law has been proposed by the Ministry of Energy for introducing limits on newly licensed crypto mines. These limits are to be 1 megawatt (MW) for every mine and 100 MW for the whole country. Regardless of these regulatory movements, five crypto mining companies have said that they are hopeful. 

This is because the government is only trying to combat the electricity shortages and continues to have a positive attitude towards crypto mining. Furthermore, some of the mining operations also believe that an influx of Chinese miners will actually empower the country into combating some age-old problems in its electricity sector, such as a reliance on coal and outdated infrastructure. The energy minister stated on November 10th that green energy solutions should be considered for dealing with the electricity conundrum in Kazakhstan. Mining operators have said that since the government wants to support power production via renewable energy, crypto mining can actually be good for the country.

The largest central Asian country, Kazakhstan is located on some of the world’s biggest deposits of coal, natural oil, gas and uranium. It is an energy exporter because the country produces more energy than it can use. However, the excess capacity was consumed by the Chinese miners when they set up shop in the country and the surplus vanished. Magzum Myrzagaliev, the Minister of Energy, said on November 4th that the electricity demand in Kazakhstan had been growing steadily by 1% to 2% annually 10 months back. 

But, the demand has surged in 2021 by almost 8% and this was because of crypto mining in the country. The lack of electricity obviously became a problem for the natural grid quickly and in mid-July, there was a total blackout in Kazakhstan’s largest city and former capital, Almaty. These shortages will get worse with the approaching winter season, since there is a high demand for heat during this time. The winter temperatures in Kazakhstan are between -9°C and -12°C. The KEGOC had decided to counter the shortage by cutting off supply to some of the miners in September, especially those that are based in the Southern part of the country.