Refusal of “gingerbread”
Kazakh miners never recovered from the protests at the beginning of 2022, and the new measures of the authorities only increased their outflow from the country, which was once the most attractive in the CIS for receiving cryptocurrencies, Artem Deev, head of the analytical department of AMarkets, told Gazeta.ru.
“Mining rates have been seriously raised since the beginning of 2022. The government of Kazakhstan can be understood: the miners earned, but spent the received cryptocurrencies in other countries,” he said.
According to the crypto expert, another reason for this attitude of the authorities is the plans of the central bank to introduce digital tenge. In this case, cryptocurrencies will be competitors, which the regulator definitely cannot allow, Deev is sure.
Anton Bykov, a senior analyst at Esperio, told nauzal.com that voluntary-compulsory “whitewashing” of the mining industry is in full swing in Kazakhstan.
“The government of Kazakhstan has put aside the “carrots” and is mainly wielding a stick, while raising taxes on the production of cryptocurrency and conducting raids to identify “gray” miners that threaten the stability of the energy system of Kazakhstan,”
– said the specialist.
According to the financial monitoring agency of Kazakhstan, 51 mining farms have already been closed, and another 55 have voluntarily dismantled equipment and taken it to other countries. About 30 miners are officially registered in Kazakhstan.
Bykov said that the actions of the authorities are more like an attempt to consolidate the “white” miners and transfer to them the volumes of electricity released after the closure of the “gray” ones.
If earlier “gray” miners pulled the “electricity blanket” onto themselves, now the state has redistributed electricity supplies in favor of legal companies,” he explained.
Already this year, Kazakhstan has lost second place in the world to Russia in terms of mining volumes, BitRiver CEO Igor Runets told nauzal.com.
The United States remains in first place, followed by Russia, and Kazakhstan now closes the top three. According to him, miners still remain in Kazakhstan, however, more and more market participants “are leaving wherever they can continue their operations.”
Following the example of China
Artem Deev from AMarkets noted that back in 2020, when systematic and large-scale work began in China to ban cryptocurrencies and mining, most of the CIS countries were not ready to become a new platform.
Many miners then chose Kazakhstan, and this allowed China’s neighbor to become the second state in terms of mining in the world in two years, second only to the United States.
But now the Commonwealth countries are more likely to follow the example of China and Kazakhstan, tightening the conditions for miners, and not vice versa.
Kyrgyzstan has recently adopted changes to local legislation aimed at increasing the cost of electricity and other restrictions on the mining of digital currencies, said Igor Runets, head of BitRiver.
“Problems with the development of the energy complex and energy shortages have become aggravated there. All this together led to the transfer of existing mining capacities and new large projects to other jurisdictions,” he added.
Anton Bykov from Esperio noted that the most profitable countries in the world for mining cryptocurrencies at the moment are the USA, Costa Rica, Russia, Georgia and Kazakhstan.
Now among the CIS countries, Russia is the most attractive for mining, where low electricity tariffs are still in place, said Artem Deev from AMarkets.
“The key word here is yet. Surely our government will think about raising mining rates, ”the specialist considered.
He clarified that new measures can be taken even despite the fact that there are separate territories in the country that are most suitable for the production of cryptocurrencies. He cited the Irkutsk region as an example.
The head of BitRiver, Igor Runets, also considers Russia to be the most promising state for mining in the CIS.
“The country has developed and, we hope, will soon adopt new rational and business-friendly legislation on mining and on the circulation of digital currencies,” he said.
According to the expert, the presence of a large surplus of energy capacities has already formed the most attractive conditions for the development of mining and other types of crypto projects.
Esperio analyst Anton Bykov suggested that miners also take a closer look at Georgia. “If you choose a location for mining only among the CIS countries, then it is Russia and Georgia that may be of the greatest interest,” he added. Bykov pointed out that the growth of the “energy footprint” from miners has been noticed in Russia.
“This is expressed in the growth of electricity consumption in Russia in the first four months of 2022 in the IPS of the East (this includes the power systems of the Amur Region, Khabarovsk Territory, the Jewish Autonomy of the Region, Primorsky Territory and the Republic of Sakha), the South and Siberia,” the expert noted.
According to him, to say for sure whether this surge is connected precisely with the move of miners to Russia, and not with the growth of mining by citizens of the country, will show an updated report from the Cambridge Center for Alternative Finance (CCAF) with data on the share of mining by country.
The interviewed experts considered that only Russia itself, or rather, a possible decision of the authorities to tighten the conditions for mining, can prevent the growth of Russia’s role in the crypto market.
Artem Deev from AMarkets explained that the announcement of the launch of the digital ruble in 2023 serves as a signal for such a step.
“So, tightening of legislation for the crypto market and miners in Russia can be expected by the end of 2022,” the expert noted.
Esperio analyst Anton Bykov pointed out that a tightening trend is emerging in almost all CIS countries.
“However, this is not a uniform process. In Kazakhstan and other countries of Central Asia, the rules are being tightened faster due to the shortage of electricity, while in Russia or Georgia, tightening is slow,” he added.
The specialist is sure that within one or two years the regulation of cryptocurrency mining in the entire post-Soviet space will be tightened.
BitRiver CEO Igor Runets more positively assessed the innovations in Russian legislation regarding mining.
“We see a significant influx of solvent mining investors into Russia and we believe that with the adoption of a new balanced regulation in this area, our country has every chance of becoming the world leader in mining,” he said.
According to Deev’s forecast, if the decision to tighten legislation in Russia is made, then the mecca for miners will remain the United States, which ranks first in the world in terms of crypto mining.
“The rest of the countries are demonstrating that they will move in the wake of China, where, as the digital analogue of the national currency is introduced, the legislation for crypto is being tightened at the same time,” he concluded.