Kazakhstan does not have enough energy capacity to meet the needs of the crypto mining industry. For this reason, many of them are fleeing to Russia and the US.
On November 24, Didar Bekbau, a co-founder of Xive, a crypto-mining company that operated in Kazakhstan, tweeted that it was shutting down operations due to a lack of electricity. He later told Coindesk that many other companies in the industry are also moving to other countries.
Little sad to shut down our mining farm in south KZ. Last container is ready to be sent. So much work, people, hopes are ruined. Country risk played out pic.twitter.com/J8ZMg6GeUI— Didar (@didar_bekbau) November 24, 2021
Earlier, CoinIdol, a world blockchain news outlet, reported that Kazakhstan was threatened by an energy crisis caused by the influx of cryptocurrency miners from China. In order to protect citizens from potential power outages, the government has capped the energy consumption of mining farms at 100 MWt, which is not enough for most of them to operate properly.
Such restrictions are driving industry players to countries that offer more favourable working conditions. Some of them flee to the US, which is expanding its global leadership in mining capacity. Others choose neighbouring Russia.
Despite the lack of regulations and uncertainty over the government's stance on cryptocurrencies, Russia has enough power to keep crypto miners running. Moreover, electricity prices are really cheap in some regions, which makes them particularly attractive.
Currently, the Irkutsk region seems to have become a kind of crypto-mining capital. It offers the cheapest electricity prices in the whole country. Moreover, the region has enough energy to avoid the risk of a possible power outage.
On the other hand, Russia is trying to fight illegal mining companies that consume electricity without paying for it properly. To this end, the State Duma is working on a set of rules to legalise the industry, and it is currently not clear what will come out of it.
In the meantime, the President of Kazakhstan, Kasym-Zhomart Tokarev, has instructed the government to develop a legal framework that will guarantee favourable conditions for the industry. However, this does not seem possible without additional energy capacity that would save the country from a potential crisis.
To meet the needs of the cryptocurrency mining industry without harming its citizens, Kazakhstan would need to build additional power plants with a capacity of at least 1,000 KWt. So far, however, the government has not announced any plans to develop the energy sector.