The protests in Kazakhstan, sparked by the electricity and gas crisis, also appear to be related to a financial activity led by the state: mining of cryptocurrencies, such as Bitcoin and Ethereum.
These activities, the complex set of technological procedures to create digital currencies, require massive energy expenditures, and the hydrocarbon-rich country, especially in the past year, has been the destination of choice for many crypto firms, both legal and illegal — the latter operating without a license, according to some national estimates, up to, according to some national estimates, up to 50% of the total – attracted by low energy prices. According to an estimate by the Financial Times, in the past 12 months, about 88,000 companies of this type from Chinese provinces have moved to Kazakhstan, seeking independence from Beijing and taking advantage of the advantages of the former Soviet republic, given that among the main factors that allow the profitability of cryptocurrency mining activities There is exactly the price of energy. But this number, due to illegal operations, can be underestimated.
It quickly became the second country in the world in terms of bitcoin mining. According to data from the University of Cambridge, Kazakhstan’s share of the Bitcoin network’s hash rate (the number of times this network attempts to complete these complex computations per second) is 18.10%, ranking only after the United States (35, 40%) and ahead of Russia (11.23%).
These activities have contributed to an increase in domestic energy consumption, which has grown by 8% since the beginning of 2021, versus average annual increases that have typically hovered around 2%. The Kazakh Energy Ministry, accompanied by environmental activists, had already sounded the alarm last November, when it noted this unprecedented increase in demand for electricity. The government itself did not have many doubts about the root cause to be identified in the science of cryptocurrency. Meanwhile, Kassym-Jomart Tokayev, President of Kazakhstan, commented on the state of the country’s cryptocurrency industry, saying that “it is necessary to clearly assess its potential” and that the country will do everything possible to promote the development of financial technology. .
So the government has already announced that it will tighten measures against unauthorized crypto activities and that it will tax all those who have registered offices in Kazakhstan. The Deputy Minister of Energy had promised to “stop these illegal activities as soon as possible”, considering the sole culprit of the current energy crisis. The deputy minister called them “small-group operations that mine bitcoins without paying taxes.”
Since January, the Kazakh government has decided to raise the price of energy for registered companies on a regular basis: they will pay one tenge (Kazakh currency, equal to 0.00200 euros) for each kilowatt-hour consumed. Another measure will include energy rationing for these companies to reduce pressure on the electricity grid in the capital, Nur-Sultan.
Just yesterday, when the popular uprising was just beginning, Caanan, the fifth largest crypto company in the world, announced the expansion of activities in the city of Taraz, 400 km from the center of the Almaty uprising, to reach 10,300 Avalon Miner (machines. Cryptocurrencies).
Meanwhile, the country’s state of emergency has been extended to the entire territory and the government has resigned.