Electricity in Exchange for Crypto: Kazakhstan’s New Mining Strategy Explained

[Spaceman1000$]

You know that Kazakhstan is one of the countries that have high numbers of bitcoin miners, the country is the fourth to fifth largest after United States, Russian and China.

The Kazakhstan government will offer large crypto mining companies electricity at capped rates for ten years in exchange for transferring part of their mined assets to the state at no cost. It means crypto miners will receive electricity from the country power plant directly, but the miners will in return be sending part of their mined coins to the Kazakhstan national crypto reserve.

If you want to understand it more, read it on https://en.orda.kz/electricity-in-exchange-for-crypto-kazakhstans-new-mining-strategy-explained-10980/

Gradually more countries will have bitcoin reserves.

Hold your bitcoin.

From what I read in the article, it is a strategy used by the government to built its own crypto reserve, which I think is a welcome development, at least it is coming from zero cost outside the fact that they have to supply electricity to the miners at a subsidized rate. This kind of news will automatically make lot of miners across the globe to supposedly migrate to Kazakhstan, because if you look at the rate at which miners pay for electricity, The amount is outrageous in some states. There are lots of countries that spend huge amount of money to create crypto reserve, some states have their reserve from offenders, who the government supposedly confiscate their crypto. If we should follow up with this development, you will be amazed the level of crypto reserve Kazakhstan will be having in their coffers in the next couple of years.

[coinlary]

I think it'll be beneficial to both the government and the miners if miners will get predictable electricity costs while the government gradually builds a Bitcoin reserve.

At the end the Government benefits more than the miners themselves . They remove expenses first then collect even more 10 percent on main balance , definitely looks like they are going to benefit more . Unless the miner the expenses us way reduced to the extent that the mining company still makes some good profit after  the whole subtraction.

That said, I'm a bit sceptical that the agreement when reached will remain attractive between both parties in the whole 10 years since we all know that energy costs and Bitcoin price can significantly change within that period.

Probably not for the miners because they may need more, but the other side will always be fine .

Agreements can be tuned anyway.

[Alpha Marine]

Expenses for electricity, power transmission, balancing services and use of the national grid will first be deducted from the value of the mined assets. The state will then receive 10% of the remaining amount.

This doesn't look like a bad deal if I understand it correctly. This means the mining company gets to take out their cost of production before deducting 10% for the government. When you consider that they won't be paying taxes, it makes it even better.
I think it's also a good deal for Khazastan. In 10 years, they would have a pretty decent reserve.
Given the fact that electricity costs are getting so high and the average cost of mining Bitcoin is about $70k, I don't think it's a bad thing for miners.

[AmoreJaz]

From what I understood in the article of the link you attached, I'll say this is more of a partnership move from the government than outright taxation.

 The Kazakhstani government simply want to align incentives instead of increasing what the miners in the country are currently paying for electricity.

I think it'll be beneficial to both the government and the miners if miners will get predictable electricity costs while the government gradually builds a Bitcoin reserve.

That said, I'm a bit sceptical that the agreement when reached will remain attractive between both parties in the whole 10 years since we all know that energy costs and Bitcoin price can significantly change within that period.

That is very true. With that being said , I would say they can always update their terms of agreement accordingly. As prices change as well as the value of the money, both parties should come up with fair terms in which both camps will benefit. They should have the win-win situation here, otherwise, their partnership won't last as the other party might give up if they are not getting the right income for themselves.

Can you give an example besides this, because China used to keep the dollar in reserve earlier and later it sold all the reserves and bought gold. Just so that it would not fall under the pressure of America and that's why it has now stopped recognizing Bitcoin so that no country can impose its rule on it.

Sure, I'll give you another example. Prior to 2022, Kosovo was a country whose policies and regulations allowed and encouraged crypto related activities and mining. Because of the low cost of electricity then, it became a lucrative location for miners, however, everything changed it 2022 due to the high rise of energy price after domestic coal-fired plants suffered outages, to manage the situation, the government authorities had to put a complete ban on crypto mining https://www.bbc.com/news/world-europe-59879760
These are the kind of unforseen circumstances I am referring to, so you can see its too early to celebrate. Today mining it Kosovo is completely illegal.

This is a very good example that circumstances will really change the scenario as they need to adopt the current happenings in their country. We can't really say that the regulations will always stay that way because unforeseen scenarios will forced them to implement a radical change to compensate for the current situation.

[Ayers]

You know that Kazakhstan is one of the countries that have high numbers of bitcoin miners, the country is the fourth to fifth largest after United States, Russian and China.
The Kazakhstan government will offer large crypto mining companies electricity at capped rates for ten years in exchange for transferring part of their mined assets to the state at no cost. It means crypto miners will receive electricity from the country power plant directly, but the miners will in return be sending part of their mined coins to the Kazakhstan national crypto reserve.
If you want to understand it more, read it on https://en.orda.kz/electricity-in-exchange-for-crypto-kazakhstans-new-mining-strategy-explained-10980/
Gradually more countries will have bitcoin reserves.
Hold your bitcoin.

I was confused about returning mined Bitcoin to the government, but after reading the links you provided, I realized they are asking for part of the mined Bitcoin. So I think the offer isn't bad; miners would use power directly from the government without any restrictions. But instead of paying bills, they are asking for a part of mined Bitcoin in return. I think it's fair to ask for something similar to the electricity bill from the mined Bitcoin, not much extra from their power consumed.
However, I believe miners will respond to their offers. So without hassle they could mine Bitcoin. It's positive movement so far that governments are seriously thinking of reserving Bitcoin. It doesn't matter if it's seized, mined, or purchased. Official reserves will make Bitcoin stronger.

Seized coin, mined coin or market purchase, however the reserve is created, the more sovereign entities accumulate Bitcoin the more they begin to understand Bitcoin's monetary property

But I wouldn't quite call it a free market. If govt start tying electricity access with mandatory Bitcoin transfer then how attractive it will be in future will depend on how fair those condition are.

imo if they just took the value equal to actual electricity cost then it would be more like a tax or royalty. And miners might have felt comfortable accepting it. But if govt initiate excessive control or excessive demand on Bitcoin then miners may seek other jurisdiction. You know biggest advantage of mining is freedom to migrate to places where cheap energy is available.

But I hope govt don't see Bitcoin as just treasury asset. Rather they respect censorship resistance and individual sovereignty.

[TastyChillySauce00]

I think it'll be beneficial to both the government and the miners if miners will get predictable electricity costs while the government gradually builds a Bitcoin reserve.

At the end the Government benefits more than the miners themselves . They remove expenses first then collect even more 10 percent on main balance , definitely looks like they are going to benefit more . Unless the miner the expenses us way reduced to the extent that the mining company still makes some good profit after  the whole subtraction.

The miners will be getting electricity quotas at capped rate for 10 year, which means cheap electricity which I think will give better profit after whole subtraction.
Although it looks like additional 10% tax on the main balance minus the operation costs. I suppose it will benefit large-scale mining operations more, they even put a minimum requirement to be eligible in this program.

[ArabBTC]

To me as long as the government will give the miners free right of operation in the country then it is fine, the government have also offered subsidized electricity for 10years, the miners has to understand that every government would want to make profit especially when it comes to bitcoin because of its value, so it is not a bad offer, this is something that most countries will be skeptical about so if the Khazakhstan government have given the miners that license to operate it is not bad. Most countries should embrace bitcoin miners just like Khazakhstan has done if they want to remain relevant because bitcoin is a rare asset, getting it in a countries reserve is something really remarkable.

[JeffBrad12]

Kazakh government are pretty friendly with crypto, I liked their 0% personal taxation on crypto trading gains so this news about the country trying to lure big miners is not surprising but I suppose the word electricity in exchange for Crypto isn't right because the miner would still pay the electricity. The government is just facilitating.

What I hope the world adopt from Kazakh is bank payment integration that allows crypto payment that accept cryptocurrency like Bitcoin directly without the need to use stablecoins at all.