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Kazakhstan’s Cryptocurrency Mining Grows Despite Emissions Worries

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Kazakhstan’s Cryptocurrency Mining Grows Despite Emissions Worries

The increased energy demand could be met by a long-awaited nuclear power plant. 

Kazakhstan’s Cryptocurrency Mining Grows Despite Emissions Worries
Credit: Depositphotos

Kazakhstan has become the third-largest country in terms of energy consumed to “mine” Bitcoin, the world’s most renowned cryptocurrency, an impressive development for a country essentially running on coal.

Data from the Cambridge Bitcoin Electricity Consumption Index shows that Kazakhstan’s global share of cryptocurrency processing power has increased significantly, while other major “crypto mining” countries have decelerated. China, by far the largest producer of cryptocurrency units, has tightened the regulation on digital coins, leading many to switch to servers in Kazakhstan.

Against the backdrop of increased risks, BIT Mining, one of China’s largest miners, moved some of its operations to Kazakhstan, shipping around 320 servers to its western neighbor. Now, Kazakhstan hosts 20 crypto farms.

In August, The9, a Nasdaq-listed Chinese crypto mining company, said it entered an agreement with a local Kazakhstani company to build mining facilities with a total capacity of 200 MW between 2021 and 2022.

Kazakhstan offers an attractive market, with prices per kWh averaging around 5 cents, compared to 9-11 cents in Russia, China, and the United States. At around half price, Kazakhstan’s crypto mining financials look better than its competition.

In June 2020, President Kassym-Jomart Tokayev approved amendments to the country’s “digital code,” effectively legalizing crypto mining in Kazakhstan. In addition, lenient regulation and a bullish outlook for banks to start offering cryptocurrency accounts give the market an unparalleled potential.

According to recent amendments of Kazakhstan’s Tax Code, from January 2022, crypto miners will have to pay one additional tenge (0.23 cents) per kWh, allowing for the government to receive more taxes from cryptocurrency mining.

Kazakhstan’s official position has drastically changed from the skepticism of 2018, when then-head of the Central Bank Daniyar Akishev said that the country would remain conservative toward digital currencies.

The costs of the bargain, however, could be severe, as cryptocurrencies have a significant carbon footprint. Cryptocurrencies are produced, or “mined,” through a network of computers, that consume vast amounts of electricity in the process.

Kazakhstan’s electricity mostly comes from fossil fuels, with coal taking the lion’s share at two-thirds of the total. In the United States, crypto miners argue that their carbon footprint is lower because of the higher proportion of renewable energy sources in the production of electricity.

While the decades-long question of transitioning Kazakhstan away from coal still remains unanswered, the conversation about the construction of the country’s first nuclear power plant has resurfaced in recent weeks.

On September 3, Tokayev said that a nuclear plant would be the preferred solution to reduce the country’s carbon footprint: “The possibility of establishing a nuclear energy sector in Kazakhstan should be comprehensibly explored. Personally, I think that it is time to analyze this issue in depth, as Kazakhstan needs a nuclear power plant.”

The plant could be built by Russia’s Rosatom, one of the world’s leading companies in the nuclear sector. Rosatom has already laid out several different plans over the years, but the government of Kazakhstan has yet to select the location and characteristics of the plant it desires. In addition, it would have to cover a hefty bill, as the start-up costs of a nuclear power plant could reach $5 billion.

Despite the industrial pressure to brand nuclear power as “renewable,” there are reservations on the sustainability of atomic energy in the scientific community. “Although nuclear energy itself is a renewable energy source, the material used in nuclear power plants is not,” reads an excerpt of a National Geographic report.

And despite the efforts of cryptocurrency advocacy groups, the electricity consumed for digital coins is not “the most economical and efficient energy.” On the contrary, it is subtracted from civil and industrial use and is only as “clean” as the producing country’s energy mix.

It is less than likely with the current plans for the electricity sector that Kazakhstan would be able to match the increased consumption, whether to mine cryptocurrency or to supply industries and households, with new forms of production, be they renewable or nuclear. As far as the Kazakhstani grid is concerned, new demand from crypto mining could only mean an increased reliance on coal.