Kazakhstan wants to raise tax on block reward miners by 500%

The world’s second-largest block reward mining hub might become hostile to miners in the near future if new regulatory proposals push through. Kazakhstan has proposed raising the taxation on electricity consumed by miners by 500% among a raft of other measures that could see an exodus to friendlier jurisdictions.

Kazakhstan is home to the second-highest number of block reward miners, behind the United States and just ahead of third-placed Russia. The country shot up in popularity as a mining hub when China was booting miners out, with many relocating to Kazakhstan. The rise in mining activities has come to a conflict between the miners and the government on energy usage. This conflict could be about to escalate with the latest regulatory proposals.

As per a report by Kazinform, Kazakh authorities are set to raise taxation on electricity consumed by miners fivefold.

The proposal was floated by first Vice Minister for Finance Marat Sultangaziev, who wants to raise the tax from one tenge ($0.0023) to five tenge ($0.012). 

In addition to this energy tax, Marat proposed an additional tax on the ASIC mining rigs. This monthly tax will be paid by the miners whether or not they mine digital currencies or not, or even if they didn’t turn the machines on. This tax will be similar to the one paid by casino operators for their machines, the Vice Minister said.

The proposed tax regime comes at a time when Kazakh miners are struggling with energy and Internet issues. As CoinGeek reported in January, widespread protests broke out in the country following a hike in fuel prices, leading to an Internet shortage that practically decimated all mining activities in Kazakhstan for several days.

While the Internet has returned, the miners now have to contend with electricity shortages. A combination of the deadly protests, a rise in energy demand during the cold winter seasons, and power disconnections due to ‘significant energy imbalances’ has meant that miners have gone for weeks now without access to electricity.

In late January, the Kazakh national electricity supplier KEGOC published a memo acknowledging the shortages, and as one of the containment measures, it said it would cut off power to block reward miners. This disconnection was meant to end on January 31. However, according to some local sources, many miners are still yet to get reconnected, leaving them unable to operate their mining rigs.

Watch: CoinGeek New York panel, How to Achieve Green Bitcoin: Energy Consumption & Environmental Sustainability