Kyrgyzstan is Pressing on Cryptocurrency Miners with Electricity Prices

Kyrgyzstan has increased electricity fees for cryptocurrency mining farms. This is the country's attempt to alleviate the energy crisis allegedly caused by the miners' high consumption.

On September 30, Kyrgyzstan's Cabinet of Ministers approved new electricity tariffs for 2021-2025. Under this new tariff, all those engaged in mining will have to pay about 2.52 KGS ($0.029) per 1 kWh. This increase is justified by the high energy consumption needed for mining cryptocurrencies.

The new fees will put crypto mining on par with gold mines and alcohol producers in terms of energy consumption. As per Kyrgyz legislation, they will come into effect fifteen days after the official announcement. From 2022, the fees could change further depending on the inflation rate.

The cause of the crisis

Back in April 2021, cryptocurrency mining was cited as one of the reasons for the energy crisis in Kyrgyzstan, along with low investment and outdated infrastructure in the energy sector. As the activity attracted attention, many citizens participated in it, which led to an increase in consumption. In addition, many miners do not pay properly for the electricity they consume, which adds to the overall debt in the energy sector.

For this reason, miners attracted the government's attention back in 2019. At that time, the State Committee for Combating Economic Abuse liquidated several large mining facilities that were illegally consuming communal electricity.

A year later, parliament drafted a new tax framework that imposes an additional 15% VAT tax on industry participants. The tax rate is based on the fees for the energy consumed and the income rate.

Combating energy abuse

It seems that illegal use of municipal electricity for mining is quite common not only in Kyrgyzstan, but also in other countries of the former Soviet Union. According to the report by CoinIdol, a world blockchain news outlet, Ukraine is actively fighting energy abuse.

This year alone, the country's law enforcers have liquidated several mining farms that were illegally using municipal electricity and not paying for it. One large farm was located on the premises of a local utility, while the other was set up in an ordinary apartment and used a magnet to compromise the amount displayed on the meter.

Russia also preys on illegal miners, as the country is known for its hostility towards the entire cryptocurrency industry. In 2021, law enforcement agencies liquidated several mining sites that were illegally using electricity. The most recent of them was discovered on September 30 in Saratov on the premises of the local traffic police. It was operated by one of the officials.

Given the general trend to reduce energy consumption with the aim of protecting the environment, the illegal use of electricity is particularly alarming. Since mining facilities require a lot of electricity, countries could further pressurize the industry to bring it out of the shadows of energy misuse.