Crypto Mining Surges in Kyrgyzstan, Boosts Tax Revenue

Kyrgyzstan, a landlocked country in Central Asia, has seen a significant surge in tax revenue derived from crypto mining activities. In the first 11 months of 2023, the government collected a staggering $883,000, which is a substantial increase from the $133,200 gathered during the same period in 2022. This revenue windfall is primarily due to the country’s strategic emphasis on the crypto mining industry, leveraging its rich hydropower resources and a favorable tax regime.

Capitalizing on Hydropower

Despite having only one officially recognized crypto mining company, Kyrgyzstan has strategically capitalized on its abundant hydropower resources. The country’s energy is derived from glaciers, lakes, and rivers, making it attractive for crypto miners. In July 2023, President Sadyr Japarov approved the establishment of a crypto mining facility at the Kambar-Ata-2 Hydroelectric Power Plant, highlighting the government’s keen interest in this sector.

Increased Taxation for Crypto Miners

Crypto miners in Kyrgyzstan are subject to a tax rate five times higher than that of the local citizens, which is set at 10% of the cost of electricity, inclusive of value-added and sales taxes. Despite this increased taxation, the sector continued to grow, consuming 17 million kWh of electricity by October 2023. However, this growth faced challenges such as low dam fill levels and contractual delivery limitations with neighboring countries, leading miners to import power.

Legal Status of Crypto Mining and Trading

While crypto exchanges are legal in Kyrgyzstan, the country lacks a formal legal framework for the regulation of the crypto market. This absence of regulations has not deterred the sector’s growth but has certainly raised questions about the sustainability and long-term viability of the industry. Despite the remarkable increase in tax revenue, the intensive energy requirements, potential environmental impact, and substantial hardware needs of crypto mining continue to be contentious issues, raising concerns among sustainability advocates, government officials, and business leaders alike.