Kazakhstan struggles to accommodate new Bitcoin miners amid energy crisis

Following a harsh clampdown imposed by China on Bitcoin-related transactions, the exiled miners from China found refuge in Kazakhstan to mine Bitcoin without excessive government intervention. The country’s cheap electricity supply has made Kazakhstan a popular choice for miners to mine Bitcoin, however, the recent development has propelled the country to reconsider its newly acquired title.

But Kazakhstan is now fighting a rising energy crisis, as increased Bitcoin mining activity has compelled miners to make excessive use of the city’s cheapest electric supply which is now depleting at a visibly faster rate.

The feud between registered and “grey” miners

Kazakhstan’s energy minister Magzum Mirzagaliyev has assured crypto miners that the regulated crypto operations will not be hampered at any cost. However, the “grey miners” or the ones who are not registered with the government may soon be left with limited choices that include either leaving the region for good or getting themselves registered as legal crypto miners.

Bitcoin Mining is an extensive process that includes solving complex computational algorithms to create new Bitcoin. The process is necessary to maintain a standardized directory or a ledger to record each transaction systematically. The process involves heavy energy consumption that uses almost 91 terawatt-hours of electricity annually, which is 0.5% of the world’s total electricity supply.

The country boasts some of the cheapest electricity prices, almost half the rates of that in the US. The reduced prices and rates make Kazakhstan an ideal place to mine Bitcoin.

However, with the sudden influx of miners from China, the country is facing a brewing energy crisis as it relies heavily on coal to produce electricity, and the excessive pressure on natural resources is emptying the country’s coal reserves faster than ever.

Kazakh authorities estimate that crypto mining utilizes approximately 8% of the country’s electric supply, which is adding distress to the country’s natural energy reserves.

Moreover, the National Association of Blockchain and Data Center on Tuesday has called for a solution that includes going after the grey miners and encouraging them to abide by the crypto laws and legally practice bitcoin mining.

“While many illegal miners have set up operations in recent months, many Bitcoin mining companies have been operating in the country for many years who fully comply with all laws, pay their taxes, and provide local jobs,” said association president Alan Dorjiyev in a statement.

He further stated that the association is actively collaborating with both the Ministry of Energy and Ministry of Digital Development to “create a fair and transparent market where those who follow the rules can operate while those who do not will be forced out of business.”