Kazakhstan Not Going China’s Way on Crypto Mining Ban
The energy minister of Kazakhstan has disclosed that his country is not planning to follow in China’s steps to ban crypto mining even though there have been reported cases of illegal mining activities going on.
Magzum Mirzagaliev reportedly told local journalists that he doesn’t think China’s “no-go measures are right,” reports Tengrinews. This is despite admitting that Kazakhstan has started seeing “a big, aggressive growth” in its annual growth of electricity consumption which used to be about 1%-2%.
“This year, consumption growth has grown by 8%. It’s quite a big, aggressive growth. 8% in our conditions is 1200 megawatts. In order to create a generation of volumes of 1200 megawatts, it takes four to five years. It costs US$1.2 to 1.5 billion. Therefore, this problem really exists, but I want to give a clear message that no one is going to turn off “white” miners.”
“White” miners are those companies that have officially received the appropriate permits to connect to networks and meet all technical conditions while “grey” miners are those considered to be operating illegally without permission. Mirzagaliev identifies grey miners as those operating from garages, apartments, shops etc and not officially registered.
“Grey miners” are starting “to unbalance our system” but “the question of disabling them (white miners” should not stand and is not worth it,” Mirzagaliev reportedly said. He added: “It is clear that these are all businessmen who have invested their big money, and the state should act as a consistent and reliable partner. They gave permission once, it cannot be revoked.” China
China has put a ban on crypto mining-related activities within its borders since May 2021. The move supposedly gave the mining industry outside of China the opportunity to grow as reflected in the earnings and production updates from some companies.
It also forced most Chinese miners to cease their mining operations simultaneously and relocate elsewhere including to Kazakhstan even as China lost its dominance of the Bitcoin network hash power.
From a high of 75.53% in September 2019 when the Cambridge Centre for Alternative Finance’s Bitcoin Electricity Consumption Index (BECI) was first published, China’s share of hash rate collapsed to 0% by June 2021.
Like Galaxy Digital Research tipped Kazakhstan to be one of the recipient countries of the hash rate following the Chinese government’s ban, several businesses moved in with their investment in the sector over the period. They include BIT Mining, formerly 500.com, which deployed 3,819 Bitcoin mining machines with a total hash rate capacity of 172 PH/s in Kazakhstan. This is in addition to its over 50,000 Bitcoin ASIC miners and a further 4,033 mining machines to be added.
Chinese mining equipment maker, Canaan, too announced its business’ first diversification attempt into crypto mining in Kazakhstan with their latest Avalon Miner units already in operation. Another is a Nasdaq-listed Chinese company, BTCM, which announced an investment of $9.33m to build a 100mw mine in Kazakhstan with another Kazakhstan mine to host a 60mw mining operation.
At first, as a result of the growing investment interest, Kazakhstan’s global share rose from 1.4% in September 2019 to 8.6% – almost a six-fold increase. By the end of August 2021, Kazakhstan’s share had risen to 18.1% (up from 8.2%) – second only after the US which had a global hash rate share of 35.4% at the time (up from 16.8% at the end of April) – but ahead of the Russian Federation with 11% (up from 6.8%).
Mirzagaliev notes that they want to identify existing “grey” miners who consume up to 340 megawatts of energy so as to bring them to the “white” zone whose players have been identified to be consuming electricity of more than 600 megawatts.