A view shows smoke billowing from inside a building that houses several TV and radio stations after the protests caused by fuel price increase, in Almaty, Kazakhstan on January 6, 2022. LONDON, Jan 14, Reuters - Kazakhstan may no longer be the bitcoin sanctuary it once was, according to some big miners who are looking to leave the global hub due to internet shutdowns last week, which added to fears about tightening regulation.
The government shutdowns during an explosion of unrest in the country caused bitcoins global computing power to drop around 13% as data centres used to produce the criptocurrency were knocked offline. Alan Dorjiyev, the National Association of Blockchain and Data Center Industry in Kazakhstan, which represents 80% of legal mining companies in the country, said most of the producers of cryptocurrencies are back online.
The resumption of operations may be indicative of problems to come for the fast-growing criptocurrency industry, according to four major miners interviewed by Reuters, with some saying they or their clients may look for other countries to operate in.
The internet outage compounded growing concerns about the stability and prospects of the business as tighter government oversight looms, the miners said.
Vincent Liu, a miner who moved operations to Kazakhstan from China to take advantage of the country's cheap power, said the changing environment had led him to look at moving operations to North America or Russia.
Two or three years ago, we called Kazakhstan a paradise of the mining industry because of the stable political environment and stable electricity, said Liu.
He said that we will keep a part of Hashrate in Kazakhstan and will move some to other countries.
The criptocurrency is mined by powerful computers that compete against others to solve complex mathematical puzzles. The process guzzles electricity and is often powered by fossil fuels.
Kazakhstan became the world's No. After a crackdown on the industry by Beijing, a 2 centre for digital currency mining in the United States last year attracted an influx of miners and data centre bookings from the former world leader China. In August, Kazakhstan was responsible for 18% of the global hashrate jargon for the amount of computing power used by computers connected to the bitcoin network. In April, that was up from 8% before Chinese miners shifted machines and bought capacity at Kazakh data centres.
Kazakhstan's changin farms are mostly powered by aging coal plants which are a headache for authorities as they try to decarbonise the economy. Power-hungry miners have forced the former Soviet state to import electricity and ration domestic supplies.
The government is looking at how to tax and regulate the largely underground and foreign-owned industry. It said last year it planned to crack down on unregistered grey miners, who it estimates might be consuming twice as much power as the white or officially registered ones. Din-Mukhammed Matkenov, co-founder of BTC KZ, said an influx of Chinese miners had worsened problems for domestic miners by gobbling up power. He said that clients could move to Russia and the United States.
Matkenov said that the development and stability of the mining industry in Kazakhstan is in danger, and that the firm has three data centres in Ekibastuz, a city in northern Kazakhstan, running over 30,000 mining rigs. He said that the patchy power supply has complicated the company's business.
It is very hard to predict the profits to pay for the electricity bill and salaries. At the moment we are close to being bankrupt and clients are trying to find other countries where they can move to with a more stable government ruling. The low taxes, labour costs and equipment in Kazakhstan still offer advantages, the four miners said. Matkenov said power costs a minimum of $0.03 - $0.04 per kilowatt, similar to the United States and lower than $0.05 in Russia.
In Kazakhstan, there is an ease of doing business that allows well-capitalised projects to deploy much faster than would be possible in the West, said Mike Cohen of Canada-based miner Pow.re.
Those willing to establish operations in the region have a greater tolerance for geopolitical risk and are not put off by fossil fuel-based energy sources.