Kazakhstan Continues To Kill Off It's Bitcoin Mining Advantage

chekohler(76)

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In the last 2 years, we've seen bitcoin miners come under attack, first, it was China, now parts of the EU and even though the EU have yet to pass a bill many are reluctant to set up large operations until they get regulatory clarity, lowering the chance of large scale mining growth in the region.

During the China ban, miners were looking for new countries to move to and one of those that benefitted from the migration was Kazakhstan which became the second biggest mining country in the world.

Now it hasn't been all sunshine and rainbows in Kazakhstan and miners have had problems like social unrest, shutting off of the internet, new taxes and I've previously spoken about how Kazakhstan set a trap for bitcoin miners

Now, however, it seems the Kazakhstani government has taken it a step further and shooting itself in the foot.

Miners getting confiscated

Kazakhstan's claim that they were far too open to miners previously and aim to rein in its local bitcoin industry has seen significant escalations. Kazakhstan's struggle with its mining industry seems to be a case of biting off more than they could chew. Miners flooded into the country starting early last year from China, and with the move being cheaper in distance and power costs favorable many Chinese miners took up the opportunity.

Shutdowns have been rampant

The Financial Monitoring Agency in Kazakhstan reported that it had registered 25 previously illegal businesses. Miners that have failed to report the start of mining operations to government agencies, illegally connecting to the electrical grid, setting up shop in special economic zones, or failure to pay taxes and customs have been shut down.

These sweeping rule changes have seen 55 mining companies have voluntarily closed down, while the agency has forced 51 more to end their activities.

These miners will obviously be on the move and could be a contributing factor to the slight drop in hash rate as they look to set up somewhere else.

Violating property rights

Now it's all good and well to have a body enforcing laws but taking other people's property is always crossing the line. A line that could force their mining majority to jump ship.

On March 15, Kazakhstan's Financial Monitoring Agency reported that the agency has confiscated mining equipment worth roughly 100 billion tenge, valued at $194 million USD.

That's no small operation, now they could plug it in and mine for themselves like Venezuela has done or destroy it as other Asian countries have done, this remains to be seen.

I just don't think once you confiscate property you can ever walk that back and people are going to trust you to set up large operations that would be easily subject to an attack like this.

Sure you can offer new incentives and try to win them back, but I think the damage is done for some miners and the reputation continues to tarnish. This just means forcing miners to decentralise even more making the network even more robust.

Could a full ban be in the works?

While the Kazakh government has been pretty aggressive there has been no talk of a full ban on mining. Pressures on energy shortages late last year have left the government skittish and with a large mining pool, the country has also implemented new registration requirements on taxes on bitcoin miners.

So I think they're still hoping to retain some operations which they can use to draw tax revenue from in the long term.

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