A recent article on Business Insider revealed that cryptocurrency mining requirements in Kazakhstan have created a shortage, prompting miners to flee. The sudden drop in power demand is not only due to reduced interest in cryptocurrencies, but also because it will become more challenging for them to run their installations.
Bitcoin mining is a process that uses computing power to solve complex math problems and create new bitcoins. Bitcoin mining requires a lot of electricity, so miners have moved to countries with cheap or free electricity such as Iceland and China. However, Kazakhstan recently announced that it will shut down its bitcoin mining operations as the country’s aging infrastructure cannot support electricity demand. Read more in detail here: when will bitcoin run out.
China’s increasing grip on digital asset regulation initially benefited Kazakhstan’s crypto mining operations.
Seven months later, however, it becomes clear that the Kazakh miners are fed up with the power cuts. Because the national grid does not provide regular electricity, several miners claim they are on the brink of bankruptcy.
Just as the nation was beginning to establish itself as a major global crypto mining hub, things seem to be moving south as miners begin to flee.
Kazakhstan initially reaped the benefits of China’s crypto ban.
In May of this year, China made it illegal for banking institutions to engage in cryptocurrency transactions. Chinese officials have become stricter on the matter in the months since.
The People’s Bank of China (PBoC) released a statement in September saying that all crypto operations are now banned.
People, as predicted, are circumventing the regulations by using DEXs and P2P exchanges. And, in certain situations, using VPNs and foreign-registered information to continue using crypto exchanges.
The PBoC responded by promising to close all loopholes, including classifying the use of foreign exchange as “illegal financial activity.” They argue that this is acceptable, as digital money “endangers people’s safety”.
“Illegal financial activities also include foreign virtual currency exchanges that use the Internet to provide services to local individuals.”
As a result of all this, there has been a significant slowdown in crypto activity in China as evidenced by the decline in mining hashrate coming out of the country.
According to the Cambridge Bitcoin Electricity Consumption Index, the Bitcoin hashrate from China dropped significantly in May. Kazakhstan’s hashrate has risen from 11.9 Eh/s in May to nearly double to 21.9 Eh/s in August.
ccaf.io is the source of this information.
Part of the reason for this was the Kazakh government’s support for crypto mining through laws that recognized the practice and offered tax breaks to miners.
It also helps that the country has one of the lowest energy costs in the world, with families paying $0.041 per kWh.
Infrastructure from the Soviet period is not up to standard.
The old Soviet-era energy system felt the pressure as soon as cryptominers opened shop in Kazakhstan. Residents immediately attribute power outages to the presence of miners in the country.
Didar Bekbauov, the founder of Xive, a crypto mining company based in the area, said:
“Mining has been made a scapegoat.”
Xive also shut down one of his minefields in southern Kazakhstan when electricity was cut in November, Bekbauov said. Although the company still has a presence in the country, he is considering ceasing all operations and moving to the United States.
Bitmain-backed BitFuFu ceased operations in Kazakhstan earlier this month to settle in the United States.
Due to unannounced maintenance, Kazakhstan Energy Grid Operating Company (KEGOC) was forced to stop the supply of electricity.
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