According to a report from a local news media, the Minister of National Economy for Kazakhstan Alibek Kuantyrov wants to bound Bitcoin mining tax to the price of the underlying asset. In that way, the government official expects the country to indirectly benefit from future BTC price appreciation.
Kuantyrov said the following about this proposal’s potential:
We are considering an increase in the tax burden for miners, at the moment we are also considering linking the tax rate for miners to the cost of cryptocurrency. If the cryptocurrency grows, it will be good for the budget.
The measure seems to be part of a broad national strategy to benefit from the expanding sector. The President of Kazakhstan Kassym-Jomart Tokayev appears to have ordered an increase in taxes for BTC mining as much as 10 times.
After China imposed a full-on ban on Bitcoin mining, large operations were forced to find new homes. Scrambled, miners moved to the U.S., some parts of Europe, and China’s neighboring countries.
A lot of BTC miners moved to Kazakhstan because of its cheap energy, cold weather, and storage space for their hardware. However, Bitcoin mining operations have faced several obstacles including political turmoil and internet outages.
In a separate report for another local news media, Alan Dorjieve, Chief of the National Association of Blockchain and Data Center Industry of Kazakhstan, clarified that taxes would increase or decrease when BTC’s price reached a certain threshold. He explained:
A gradation is being considered – for example, up to $40,000 [the price of bitcoin] one tax, over $40,000 another tax, and so on. But it’s still up for discussion.
As the local new media added, BTC miners in Kazakhstan were disconnected from the national power grid back in January 2022. According to the government official, miners continue to be locked out of the grid.
Kazakhstan Bitcoin Miners To Turn Their Luck Around?
The proposed tax for Bitcoin mining operations in this country could prove unsustainable for miners. However, it could be a short-term solution that enables these entities to return back online.
The country has gone from being a profitable investment for early BTC miners to an operational nightmare. According to Wired, in January 2022 most miners in Kazakhstan were at a loss.
Data from Arcane Research recorded as much as $4.8 million in losses every hour that these miners remain offline. There is around 90,000 mining equipment in the country, which account for close to 8% of Kazakhstan’s electric capacity.
While it’s true that the new tax could benefit the country, it could work as the final nail in a series of events that could trigger another great BTC mining exodus. Remains to be seen if the market will negatively respond to this event, as it did back in 2021.
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At the time of writing, BTC’s price trades at $40,200 with sideways movement over the past few days.
This article was first published on Bitcoinist.com