Tom Wilson

LONDON, (Reuters) – Some big miners believe that Kazakhstan is no longer the Bitcoin sanctuary it was once. This comes after last week’s internet shut downs which increased concerns about tightening regulations.

The country was the second-largest mining centre in the world. Due to the unrest, bitcoin’s computing power dropped by 13%.

Alan Dorjiyev, of Kazakhstan’s National Association of Blockchain and Data Center Industry, stated that most of Kazakhstan’s legal miners are now online.

According to four of the largest miners interviewed by Reuters for this report, the resumption may not be a sign that there are problems ahead for the rapidly-growing cryptocurrency market. Some said they, or their clients, may consider looking for new countries to do business in.

According to miners, this internet outage exacerbated concerns over the stability of the company and its prospects as tighter oversight from the government looms.

Vincent Liu was a Chinese miner who relocated operations from China to Kazakhstan to benefit of China’s low power. He said that the environment has changed and he is now considering moving operations to North America, or Russia.

Liu stated that “two or three years before, we called Kazakhstan the paradise of the miners’ industry due to the stable political and electric environment.”

“We are still evaluating this situation. He said that he believed we would keep some of the hashrate in Kazakhstan, and move others to other countries.

The “mining” of cryptocurrency and other currencies is done by highly-powered computers, which compete against each other to solve difficult mathematical puzzles. It consumes electricity and can often be powered by fossil fuels.

Following a Beijing-imposed crackdown against the sector, Kazakhstan has become the No.2 bitcoin mining centre in the world.

Kazakhstan was responsible for 18% global “hashrate” in August. This is crypto jargon that refers to computing power consumed by Bitcoin network computers. This was an increase from the 8% recorded in April before Chinese miners bought Kazakh capacity and shifted their machines.

Power Plays

Kazakhstan’s crypto mining operations are powered mainly by old coal plants. Authorities are having trouble decarbonizing the economy. The former Soviet Union was forced to import power-hungry miners and reduce its domestic supply.

It is currently looking into how the government can tax and regulate this underground, foreign-owned sector. Last year, it stated that it would crackdown on “grey” unregistered miners. It believes they might consume twice the power of “white” registered miners.

Din-mukhammed Matkenov is the co-founder and CEO of cryptocurrency miner BTC KZ. He said that an influx from Chinese miners has made it more difficult for local miners to get power. He said that clients may consider moving to Russia or the United States.

Matkenov said that the “development and stability” of Kazakhstan’s mining sector is under threat. His company has three data centers located in Ekibastuz in Northern Kazakhstan. These centres house over 30 000 mining rigs. He said that the company has been affected by a lack of power, which has made it difficult to run its business.

It is extremely unstable, and it’s hard to forecast the profit to pay the electric bill and salary. Our clients want to move to countries with stable government rulings. We’re close to bankrupt.

A request to comment was not received by the Kazakhstani Energy Ministry immediately.

The advantages of Kazakhstan’s low taxes, labor costs, and equipment are still attractive, said the four miners. Matkenov stated that power costs are at a minimum $0.03-$0.04 per Kilowatt. This is similar to what it would cost in the United States, and less than Russia’s $0.05.

Pow.re., an American miner based in Canada, stated that Kazakhstan has an easier way of doing business than the West.

“Those who are willing to set up operations in the region will have greater tolerance of geopolitical risks and won’t be influenced by fossil fuel-based energies.