ZoneBitcoin EditorialIn 2023, the government of Kyrgyzstan saw a significant increase in tax revenues generated by bitcoin mining. In fact, he collected no less than 78,6 million soms, or nearly $883, in the first 000 months of the year alone.
In proportion to the national economy of the Country, which belongs to the lower bracket of middle-income countries, this represents a considerable source of financing. THE GDP per capita is estimated at $1 in 146 by the IMF, while that of the United States is $70,000.
Tax revenues on the rise
During this year, tax revenues from cryptocurrency mining have been subject to significant fluctuations. Thus, they increased from 738 soms ($000) in February to 8 million soms ($284) in August. In November, the last month reported, revenues remained stable at 11,6 million soms ($130) after a decline from the August peak.
However, although these tax revenues are increasing, there is currently only one cryptocurrency mining company officially operating in Kyrgyzstan, whereas there were once many more.
Competition between countries to attract mining companies is ever stronger, pushing miners to choose more tax-friendly countries. There are also problems linked to changing regulations or poor incentives which have pushed mining companies to leave the country. The latter preferred to turn towards neighboring countries, namely Kazakhstan and China, although there are also difficulties in these countries. Generally speaking, the business climate is not conducive to the establishment of new businesses.
Use of hydraulic resources for bitcoin mining
Kyrgyzstan has immense water resources in the form of glaciers, high-altitude lakes and rivers, which have a total length of more than 35 km. Despite this, most of these resources remain largely underexploited. However, bitcoin mining in the country is mainly powered by hydroelectric plants.
This did not prevent the President of Kyrgyzstan, Sadyr Japarov, to approve in July 2023 the construction of a mining facility near the Kambar-Ata-2 hydroelectric power station. Bitcoin miners pay for electricity at a rate five times higher than individuals in Kyrgyzstan.
Mining Industry Issues
Despite this positive outlook financially, the mining industry encountered difficulties in 2023. Indeed, low filling levels of dams and delivery limitations due to contracts with neighboring countries have forced miners to import electricity , and sometimes the country was also forced to do this for the population. This is a similar situation experienced in Kazagstan where the country decided to limit the mining sector due to the shortages this caused on the national network.
Despite these difficulties, the industry had consumed 17 million kWh of electricity by the beginning of October 2023.
The use of energy by bitcoin miners remains a source of controversy in the country, and has done so for years.
Cryptocurrency trading is permitted in the country, but payment or trading is not regulated. However, many voices are being raised for the government to implement a policy favorable to the cryptocurrency sector. This is particularly the case of the legislator Kyrgyz Karim Khanjeza called, in March 2022, on the authorities to legalize the cryptocurrency industry during a meeting of a parliamentary committee.
Conclusion
It is clear that this still little-known Central Asian country perceives the financial benefits from cryptocurrency mining as an opportunity to be seized. Thanks to its abundant water resources and its gradual adoption of this new technology, the country is well on its way to becoming a major player in this field.
However, challenges remain, particularly with regard to regulating the use of cryptocurrencies and optimizing energy use.
