Kazakhstan has limited the amount of money local retail investors can put into crypto, domestic news website Kapital.kz reported on Wednesday.
* The AFSA confirmed the news to CoinDesk via email later on Thursday.
* Retail investors can invest 10% of their annual income or 5% of their total assets, excluding their main residence, up to $100,000 per year as long as they provide evidence of their finances to the regulator, the site reported.
* Should investors not provide any evidence of their finances, they can invest up to $1,000 per month, according to Kapital.kz, which said it attained the information from the Astana Financial Services Agency (AFSA) directly.
* The limits have been introduced to protect retail investors from crypto-related “high risks” that can include the complete loss of capital, the AFSA told Kapital.kz.
* The AFSA has also created a roadmap to develop the crypto market in the country. Under the plan, crypto exchanges will operate as a pilot starting at the end of 2021 and for one year.
* The rules set by the AFSA took effect on Oct. 26, the report said.
* The agreed rules are harsher than those proposed by the Astana International Finance Center (AIFC) earlier, according to Kapital.kz. An AIFC committee had proposed a monthly limit of $2,000 for retail investors.
* Kazakhstan has seen a massive influx of crypto miners since China started a crackdown on the crypto mining industry in May. The country is facing severe electricity shortages, in part because of the influx of miners, and is planning to limit the electricity consumption of new mines.
Kazakhstan Passes Law To Monitor Crypto Services For Money Laundering, Terrorism Financing
The law approved by the country’s parliament would make financial monitoring a requirement for digital asset platforms.
Companies working with digital assets in Kazakhstan could soon be subject to anti-money laundering (AML) regulation, according to a new law passed by the national parliament today, news agency Sputnik wrote Friday. The country’s president has yet to sign the document into law, however.
Companies issuing digital assets or providing fiat on-ramps and crypto trading services would have to notify Kazakhstan’s Ministry of Digital Development, Innovation and Aerospace Industry when they launch their services or shut them down, Sputnik said.
The agency quoted parliament member Olga Perepechina, who said that the lack of such monitoring has led to a rise in money laundering and terrorism financed using digital assets.
Kazakhstan is a popular location for cryptocurrency mining, as being next door to China has made it a place of relocation for some Chinese miners that fled China due to the latest anti-crypto crackdown there.
Kazakhstan Senate Approves Legislation Regulating Crypto Service Providers
The country’s legislature has passed a law that would impose financial monitoring on crypto platforms.
According to new legislation passed by the upper house of the country’s national parliament on Monday, crypto businesses in Kazakhstan may soon be subjected to Anti-Money Laundering (AML) regulations, as reported by local news outlet Vlast.
The new law extends the country’s financial monitoring system to cover crypto service providers.
The new legislation would also establish a legal institution of public officials. When a firm launches its cryptocurrency trading service or issues digital assets, it would have to notify the Ministry of Digital Development, Innovation and Aerospace Industry in Kazakhstan.
The institution will be in charge of conducting a risk assessment, verifying that Know Your Customer and AML regulations are being followed.
According to Vlast, Senator Olga Perepechina stated that Kazakhstan’s financial monitoring system currently does not cover legal entities that handle digital assets, organize trade or offer services for the conversion of cryptocurrencies into cash, tangible goods and other property.
The senator warned that this lack of oversight enables the rapid spread of money laundering and terrorist financing crimes, as well as the growth of the black market.
Cybercriminals, including terrorists, are encouraged to utilize digital assets and electronic methods in their settlements, she warned.
However, the proposal has not yet been approved by the country’s president, Kassym-Jomart Tokayev. Last month, Tokayev called for the “prompt” regulation of another cryptocurrency activity, Bitcoin (BTC) mining, noting the country’s power deficit.
The Central Asian nation, which has some of the world’s cheapest electricity, has become a Bitcoin mining hotspot amid an intensified Chinese crackdown.
As reported by Cointelegraph, within five years, Kazakhstan predicts that cryptocurrency mining will contribute at least $1.5 billion to its economy. The country’s current mining hash rate is second in the world after the United States.
Kazakhstan Won’t Restrict Electricity To Lawful Crypto Miners, Minister Says
The minister and local mining industry see renewables as a solution to Kazakhstan’s energy woes.
Lawful crypto mines will not face restrictions or be disconnected from the national grid, as long as they don’t compromise the country’s energy security, Kazakhstan Minister of Energy Magzum Mirzagaliyev said at a meeting with the mining industry, according to a ministry press release on Wednesday.
* Electricity has been in short supply in the fossil fuel-dependent Kazakhstan following an influx of miners this year. The national grid operator KEGOC has been rationing power to miners since September, and the government has proposed a bill that would cap the supply of power provided through the national grid to new mines to 100 megawatts.
* Mirzagaliyev called on the lawful miners to jointly search for “solutions to ensure the reliability of the unified electric power system.”
* Local blockchain and data center industry associations said they are prepared to import electricity and invest in renewable energy projects.
* Alan Dordzhiev, chairman of the Association of the Blockchain and Data Center and Technology Industry, said the government and private sector should work together to fight “gray” miners, mostly in the southern parts of Kazakhstan, that tap into the grid without proper approval.
* At the meeting, the ministries of energy and digital development, the Kazakhstan Association of Blockchain Technologies and the Association of Blockchain and Data Center and Technology Industry, as well as KEGOC signed a protocol to prevent electricity rationing, develop demand reforms to balance the energy market, and attract investment for renewable energy projects.
* Kazakhstan has emerged as the world’s number two bitcoin miner behind the U.S., after China’s crackdown on crypto this May. The crypto industry is expected to bring in 500 billion tenge (US$1.16 billion) within the next five years, according to the ministry statement.
Kazakhstan’s Crypto Miners Face New Regulations After Contributing To Power Shortages
Crypto mining could help push the country’s transition into green energy.
Kazakhstan’s energy grid is coming apart at the seams because of the massive influx of bitcoin miners. But that might turn out to be a blessing in disguise as the government and industry look for a response that won’t decimate the industry.
The Central Asian country’s share of the global hashrate – the amount of computer processing power spent mining bitcoin – roughly doubled since May, when Chinese miners, banished from their own country, started moving operations overseas.
Kazakhstan is now dealing with electricity shortages, a problem that was hard to anticipate in an energy-rich country that normally has excess electricity. Government officials have blamed the issues on the influx of miners.
In response, the national grid operator KEGOC is rationing electricity provided to mines, and the Ministry of Energy has proposed a law that would introduce limits for any newly licensed cryptocurrency mines to 1 megawatt (MW) per mine and 100MW for the entire country.
Despite these regulatory moves, five crypto miners with operations in Kazakhstan told CoinDesk that they remain hopeful: In their view, the government is just trying to deal with the pressing electricity shortages, but remains friendly towards mining.
More than that, some of them think that the influx of Chinese miners will empower Kazakhstan to deal with age-old problems in its electricity sector, including outdated infrastructure and a reliance on coal.
On Nov. 10, the energy minister called on them to look for green energy solutions to the electricity conundrum.
Despite the energy crisis it has caused, crypto mining “has a good future in Kazakhstan,” in part “because the government wants to support renewable energy power production,” said Denis Rusinovich, co-founder of CMG Cryptocurrency Mining Group and Maverick Group.
Kazakhstan, the largest country in Central Asia, sits on some of the world’s largest deposits of oil, natural gas, coal and uranium. It is a net energy exporter because it produces more than it can absorb.
But when Chinese miners set up shop in Kazakhstan, they took up any excess capacity and the surplus disappeared, said two crypto miners with operations in Kazakhstan, a representative for Kazakhstan’s largest mine hosting firm Enegix, Rusinovich and Didar Bekbau, co-founder of Kazakh mining firm Xive.io.
In a Nov. 4 interview with local news outlet Tengrin News, Minister of Energy Magzum Myrzagaliev said that Kazakhstan’s electricity demand had been steadily growing by 1%-2% annually until about 10 months ago. Starting 2021, demand has grown 8%, or about 1,000MW-1,200MW, which Myrzagaliev said was due to crypto mining.
This lack of electricity quickly became a problem for the national grid, with Almaty, the former capital and largest city in Kazakhstan, suffering a total blackout in mid-July.
The shortages are expected to worsen as winter approaches, when demand usually rises for heat. Kazakhstan’s winter temperature averages between -9°C and -12°C, according to the World Bank’s Climate Knowledge Portal.
To deal with the shortage, KEGOC started cutting off electricity to some miners in September, particularly in the southern part of the country.
Bekbau said one of their mines in the south has been shut down whilst others are facing electricity rationing. Rusinovich said the longest shutdown he is aware of lasted two days and occurred around mid-October.
The Enegix representative said their mines are facing electricity restrictions during peak hours for about four to six hours per day.
The rationing not only applies to crypto mines. KEGOC announced planned outages for various consumers in October. But miners are a low priority to the government, so when there is a shortage, they are the first ones in the line of fire, Bekbau said.
The south is particularly vulnerable because it isn’t home to power plants. Electricity is mainly generated in the north part of the country, close to Kazakhstan’s rich coal deposits.
Out of Kazakhstan’s 21,000MW of installed electricity capacity in 2017, more than half came from coal, the overwhelming majority of which was produced in the north, the World Bank said in a 2017 report.
But the Soviet-era national grid is not able to carry the electricity to the south, where installed capacity is scarce, Rusinovich and Bekbau said.
However, two other miners who wished not to be identified for this article because they weren’t authorized to speak on the matter, denied facing any forced electricity shutdowns.
The power restrictions come with a cleanup operation, whereby the government is trying to crack down on unauthorized mines that tap into the national grid without the right approval from authorities, including KEGOC.
Increasing numbers of illegal miners have contributed to the electricity deficit, Enegix CEO Yerbolsyn Sarsenov told CoinDesk in a statement.
KEGOC did not respond to CoinDesk’s request for comment on this article.
Energy minister Myrzagaliev blamed the electricity shortages on the influx of miners. According to the minister, gray miners in Kazakhstan consume 340MW of electricity, vis-a-vis 600MW consumed by lawful mining operations, he said in an interview with Tengrin News.
But the capacity going to gray mines is hard to estimate and might be as high as 1,000MW-1,200MW, Vice Minister Zhurebekov told Tengrin News.
President Kassym-Jomart Tokayev instructed the energy minister to quickly set up a regulatory framework which would allow existing “white” miners to continue their work without additional restrictions, according to an Oct. 29 meeting readout.
On Oct. 1, the Ministry of Energy issued a draft law that called on limiting the total electricity capacity going towards new mines to 100MW for the whole country, and 1MW per mine, for a period of two years.
The bill is set to take effect 60 days after it is published, but in the meantime it is open for public comments and could be altered.
All miners that CoinDesk spoke to agreed that the restrictions wouldn’t apply to existing mines. “The bill proposes to limit the permits given to new miners,” so it will not affect existing mines, said Enegix’s Sarsenov.
On Nov. 10, at a meeting with crypto industry representatives, Myrzagaliev confirmed that lawful mines that have been properly registered with authorities won’t be subject to restrictions.
When setting up crypto mines, companies usually sign long-term contracts with energy providers, in this case mostly KEGOC, locking up electricity prices for months or years.
They have to follow a cumbersome process to get approval for their industrial energy use. It would be extremely difficult for the law to reverse existing contracts that have been signed following the correct procedures, people familiar with the process agreed.
But those that were working on new projects or had projects under construction are “waiting with crossed fingers” Bekbau said.
“I am open to dialogue,” Myrzagaliev said after a meeting with the crypto mining industry representatives.
After the consultation process, the final bill might include some exemptions to the 100MW limit that could create more leeway to build new mines. Some of these exemptions would push the country’s transition into renewable energy by encouraging miners to build their own green energy production capacity.
The law could require that miners have to build out their own renewable energy production capacity to match what they consume from the national grid, Bekbau said, or could exempt miners that use green or imported energy from the hard cap, Rusinovich said.
During the Nov. 10 meeting with the Ministry of Energy, miners noted that they are “ready to” import power from overseas and invest in renewable energy.
Enegix announced it plans to achieve energy autonomy using hydropower plants on Nov. 9. The company will start building plants to harvest energy from rivers in the first quarter of 2022.
Despite the power rationing and the bill, miners CoinDesk spoke to are hopeful about Kazakhstan’s future in the industry.
In June, Kazakhstan’s president also signed into law a bill under which crypto miners will be taxed 1 Kazakhstani tenge ($0.0023) per kilowatt hour consumed, starting in 2022. Miners see this as a positive development. Taxation means the government is welcoming the industry instead of banning it.
“It looks like the government wants to benefit from the ban in China” to increase its revenue, one source in Kazakhstan said.
The miners CoinDesk spoke to said the shortages reveal existing problems in Kazakhstan’s electricity infrastructure: Back in 2017, when mining saw its first boom in the country, the World Bank was already warning of an impending energy deficit.
The deficit is related to failures of major power plants in northern Kazakhstan, said the CEO of Enegix. When KEGOC announced power rationing across south Kazakhstan, it was responding to the failure of three major coal plants that caused a loss of 1,000MW of capacity.
These failures can be in part attributed to antiquated facilities. Kazakhstan’s energy infrastructure dates back to the Soviet Union. The government has been talking about updating it for a decade, Bekbau said.
With new taxes from miners, and a large new client for KEGOC that consumes a steady amount of electricity, Kazakhstan might update its infrastructure and pivot towards renewables after all.
In the meantime, however, some miners have already left the country, like Russia, Bekbau said. But this only represents a small minority as the rest are waiting for the final version of the bill, he said. Moving out of Kazakhstan is expensive because it is a landlocked country.
Miners who have done their due diligence and followed cumbersome legal procedures to lock up electricity prices and set up legit facilities in the country are unlikely to just pick up and leave, one miner told CoinDesk.
But he said the company is monitoring the regulatory situation and could change future plans for more investment in Kazakhstan.
‘We Are The Number Two Crypto Miner In The World, And We See Practically No Financial Return,’ Says Kazakhstan President Tokayev
In addition to calling for greater regulation in the cryptocurrency industry, President Tokayez contemplated the introduction of a digital Kazakhstani tenge.
During a meeting with representatives of the financial sector on Friday in Almaty, Kassym-Jomart Tokayev, President of Kazakhstan, expressed his opinion on the current state of affairs of the country’s cryptocurrency industry.
The details of the speech were posted on the official website of the President of the Republic of Kazakhstan, and translated by Cointelegraph:
Cryptocurrencies are an objective factor that cannot be simply ignored. It is necessary to clearly evaluate their potential to influence the current financial system.
He Then Added:
“Therefore, work should be resumed on the formation of a balanced regulatory environment for the creation of cryptocurrency exchanges in the country. Otherwise, it turns out that we are the number two country in the world for cryptocurrency [Bitcoin] mining, and we practically do not see financial returns.”
According to data from the University of Cambridge, Kazakhstan’s share of the Bitcoin (BTC) network’s total hash rate amounts to 18.10% — the second in the world behind the United States (35.40%) and ahead of Russia (11.23%).
However, there exists a large number of individuals carrying on Bitcoin mining with disputed legal status in the country. Gray area miners account for as much as 50% of all cryptocurrency mining activity in Kazakhstan by some estimates.
In the context of President’s Tokayev statements, the lack of cryptocurrency regulation results in, for better or worse, very little tax revenue being captured by the government despite the industry’s sharp growth in recent years.
Nevertheless, President Tokayev discussed the possibility of introducing a digital tenge as a “representative of the financial system” and further reiterated his support for fintech development in Kazakhstan:
Our financial institutions must seize the chance and tackle ambitious goals. It is necessary to not only copy someone else’s experience but to develop and promote new formats of services that go beyond the borders of Kazakhstan. The state will do its utmost to promote these initiatives.
Kazakhstan Could Turn To Nuclear Power To Keep Its Bitcoin Mining Industry Running
Kazakhstan’s President Kassym-Jomart Tokayev suggested building a nuclear plant to support bitcoin mining and offer refuge to migrant crypto miners from China.
As per Nikkei Asia, Kazakhstan’s president Kassym-Jomart Tokayev has suggested building a nuclear plant to sustain Bitcoin mining in a bid to support the profitable crypto mining activities in the nation
“Looking into the future, we will have to make an unpopular decision about the construction of a nuclear power plant,” said Tokayev in a bankers meeting held in Almaty last Friday.
Tokayev first discussed the idea of building a nuclear power plant with Russia’s President Vladimir Putin in April 2019. However, the idea could not be acknowledged following the heavy criticism that it received back then.
The critics were quick to respond, referring to the nuclear plant idea as an “ecological disaster” in the making. Despite growing unease among Kazakh’s citizens, President Tokayev is keen on pursuing the idea and have addressed the apprehension of citizens regarding constructing a nuclear plant as “inappropriate”
Kazakhstan’s looming power crisis
Kazakhstan boasts low-cost electricity prices that have transformed the country into a popular crypto mining spot.
When China imposed a heavy crackdown on Bitcoin mining activities in its country, a large group of ousted miners took refuge in Kazakhstan, where they could mine crypto without excessive government intervention and could make use of its easily accessible and cheap electricity to mine Bitcoin.
To fuel the growing demand for Bitcoin mining, the country’s energy supply had to double over to accommodate such a large influx of crypto miners.
According to Cambridge Bitcoin Electricity Consumption Index’s IP data, Kazakhstan controls approximately 35% of Bitcoin mining power, which is second to that of the United States.
Due to this sudden increase in crypto mining activities in Kazakhstan, the nation is now facing a heavy power crisis where its citizens are now experiencing frequent power outbreaks.
Top Bitcoin Mining Country Kazakhstan Turns Off Internet Amid Protests
The government of Kazakhstan shut down the internet after the cabinet resigned amid major anti-government protests.
Kazakhstan, which boasts the second-largest (BTC) mining hash rate in the world, is experiencing major internet disruptions amid local anti-government protests.
Network data provider NetBlocks reported Wednesday that Kazakhstan was “in the midst of a nation-scale internet blackout after a day of mobile internet disruptions and partial restrictions.” According to the data, the normalized network connectivity in Kazakhstan fell to 2% on Wednesday.
“The incident is likely to severely limit coverage of escalating anti-government protests,” NetBlocks noted.
Kazakhtelecom, the largest telecom company in Kazakhstan, has shut down the internet across the nation, according to some reports. Cellular networks have reportedly also been disabled in some cities, such as Almaty.
Kazakhstan’s ongoing internet outage comes after the Kazakhstan government resigned amid protests that were sparked over a sharp rise in fuel prices. President Kassym-Jomart Tokayev sacked Kazakhstan’s government early on Wednesday and declared a state of emergency in Almaty and the surrounding province.
According to some analysts, the protests are also a response to the lack of democracy in the country.
“Young, internet savvy Kazakhs, especially in Almaty, likely want similar freedoms as Ukrainians, Georgians, Moldovans, Kyrgyz, and Armenians, who have also vented their frustrations over the years with authoritarian regimes,” Tim Ash, emerging market strategist at BlueBay Asset Management, said.
The protests have taken a violent turn, with reports of sustained gunfire between protestors and state security organs, including the police and the national guard.
The latest internet outages could affect the global Bitcoin hash rate. As previously reported by Cointelegraph, Kazakhstan accounted for 18% of the total global BTC mining hash rate distribution as of October 2021, second only to the United States.
Many Chinese Bitcoin mining companies and miners were increasingly relocating their services in Kazakhstan after the Chinese government announced a renewed ban on the crypto industry in September 2021.