In recent years, Kazakhstan has emerged as one of the worldwide leaders in total cryptocurrency operations per country. One of the causes of this rise was the governmental policy of incentivizing cryptocurrency miners to build operations in Kazakhstan. Due to these efforts, 6.17% of the world’s cryptocurrency is mined in Kazakhstan. Only three other counties produce more of the world’s cryptocurrency supply than Kazakhstan.
Currently, the top four cryptocurrency producers worldwide are: (1) China, with a rate of 65%; (2) the United States, with a rate of 7.24%; (3) Russia, with a rate of 6.9%; and (4) Kazakhstan, with a rate of 6.17%. As of 2020, thirteen cryptocurrency mining operations are hosted by Kazakhstan, and four more are under construction. These operations amount to approximately $200 million.
However, the number of mining operations within Kazakhstan is expected to substantially increase in the next several years. According to the Digital Development Minister, preliminary agreements have been reached to increase cryptocurrency mining investments by about 300 billion tenges, or approximately $190 million. Furthermore, government officials believe that by 2023, cryptocurrency investments will increase by $738 million.
Simultaneously, the number of operations in China has been radically decreasing. In June 2021, the Chinese government banned cryptocurrency mining within its borders. The Chinese government implemented a “crackdown” and began ordering the closure of mining operations throughout the country. By June 20, 2021, China had shut down over 90% of the country’s mining operations.
According to government officials, cryptocurrency mining provides three benefits for the country. First, this investment will provide jobs to the citizens of Kazakhstan. Second, cryptocurrency mining operations are taxed at a rate of 15%. Accordingly, attracting cryptocurrency mining operations to Kazakhstan will increase the total amount of taxable revenue for the government. Third, these mining operations will help diversify Kazakhstan’s economy, which is currently largely dependent on oil. For these reasons, the government has implemented a policy of increasing mining operations within the country.
Digital Currency – Blockchains
Kazakhstan offers several competitive advantages for cryptocurrency miners. First, Kazakhstan provides a favorable legal environment for mining operations. In December 2020, the government formally legalized cryptocurrency mining within its borders. On May 6th, 2021, the National Bank of Kazakhstan announced its plans to issue a “digital tenge,” which is their version of a CBCD. For these reasons, Kazakhstan offers cryptocurrency minors a favorable legal environment to establish mining operations.
Second, Kazakhstan offers relatively cheap and nonvolatile electricity prices compared to other countries. While China’s electricity costs vary by season, Kazakhstan’s electricity costs remain relatively stable throughout the year. Cheap electricity is a competitive advantage for miners because cryptocurrency mining requires an abundant supply of electricity. Hence, cheaper electricity leads to more significant profit margins for cryptocurrency miners. Therefore, Kazakhstan has several competitive advantages that will likely cause the number of mining operations to substantially increase within the country.
Due to these competitive advantages, Kazakhstan has emerged as one of the best places worldwide for cryptocurrency entrepreneurs to establish mining operations. Furthermore, the number of mining operations within Kazakhstan is expected to substantially increase. Accordingly, the country could eventually emerge as one of the top three cryptocurrency producers worldwide.