Kyrgyzstan’s Crypto Mining Potential with Hydropower

Kyrgyzstan, nestled in Central Asia’s stunning landscapes, holds a hidden ace for its burgeoning crypto mining industry: abundant water resources. This natural wealth, however, faces hurdles in powering the country’s crypto ambitions due to existing limitations.

The country proudly stands as Central Asia’s sole nation whose water resources stem almost entirely from its own territory, marking it as a hydrological gem. With a profusion of over 2,000 rivers exceeding 10 kilometers in length and approximately 6,836 square kilometers enveloped by lakes, ponds, and reservoirs, Kyrgyzstan’s water endowment remains a fundamental asset. Further enhancing this bounty are 6,580 glaciers, amassing reserves of about 760 billion cubic meters.

Yet, despite this aquatic abundance, Kyrgyzstan grapples with the necessity to import electricity, a predicament stemming from assorted restrictions and technical impediments.

Nonetheless, the key to unlocking Kyrgyzstan’s crypto mining prowess lies within these resources, asserts Energy Minister Taalaibek Ibraev. In a recent local media release, Ibraev highlighted that proprietors of mining farms also own small-scale hydroelectric power stations, channeling generated electricity for internal use initially and subsequently through contractual arrangements. Any surplus electricity, he added, finds its way into the state’s grid.

Presently, however, Kyrgyzstan’s solitary operational mining farm sources electricity from Kazakhstan, compensating Kyrgyzstan for the transit. This scenario embodies the prevailing challenges faced by the industry.

The landscape of Kyrgyzstan’s mining ecosystem experienced substantial shifts in the last year. Despite political proponents advocating for industry legalization, mining activities confronted stringent limitations during an energy sector emergency that commenced in August 2023. As of October 2023, only one crypto mining farm remained operational, emblematic of the industry’s struggle.

President Sadyr Japarov’s approval for the construction of a crypto mining facility at the Kambar-Ata-2 Hydro Power Plant, backed by a $20 million allocation, reflects the nation’s endeavor to harness surplus energy. However, the operational expenses of running a crypto farm loom large, especially with the highest tariff rates imposed on crypto mining activities.

Energy Minister Taalaibek Ibraev defended the industry’s existence, citing its contribution to the country’s budget through electricity imports and associated taxes. He affirmed the legality of mining farms but underscored their reliance on imported electricity, elucidating their tax contributions and substantial revenues filling the national treasury.

A December report outlined the mining tax’s pivotal role in revenue generation for the country’s budget, showing consistent growth throughout the year. The tax, a significant financial stream, surpassed previous figures, notably peaking in August 2023.

In essence, Kyrgyzstan’s crypto mining industry, though beset by challenges, serves as a crucial revenue source for the national budget, leveraging the country’s abundant water resources despite existing constraints.