In a fiscal triumph, the Kyrgyzstan government has reportedly amassed a substantial 78.6 million soms (approximately $883,000) in taxes from cryptocurrency miners during the first 11 months of 2023. This revelation, disclosed by the Finance Ministry and cited by local press reports, unveils the volatile nature of crypto mining tax revenues throughout the year.
Tax returns from the crypto mining industry experienced fluctuations, ranging from 738,000 soms ($8,284) in February to a peak of 11.6 million soms ($130,212) in August. November, the concluding month on record, saw receipts stabilize at 7.6 million soms ($85,767) after a decline from the August high. Remarkably, only one cryptocurrency mining company is currently officially operating in Kyrgyzstan, a stark contrast from its previous vibrant landscape.
Crypto Landscape and Tax Dynamics
Comparing the tax revenue of the first 11 months of 2022, which stood at 11.1 million soms ($133,200), the industry has witnessed notable growth. The tax rate is fixed at 10% of the electricity cost, encompassing value-added and sales taxes. Kyrgyzstan, rich in untapped water resources such as glaciers and rivers spanning over 35,000 km, primarily relies on hydropower for its crypto mining operations.
Presidential Nod Boosts Crypto Mining
President Sadyr Japarov’s approval in July 2023 for the construction of a crypto mining facility at the Kambar-Ata-2 Hydro Power Plant marked a significant milestone. However, crypto miners now face a fivefold increase in rates compared to the general public in Kyrgyzstan.
Challenges in Crypto Production
Despite the favorable tax climate, cryptocurrency production encountered setbacks in 2023 due to low dam fill levels and delivery restrictions stemming from agreements with neighboring countries. Miners resorted to importing power, a situation where the government also faced challenges. By October 2023, the crypto industry had consumed a staggering 17 million KWh of electricity.
Controversies Surrounding Energy Use
The energy consumption by crypto miners remains a contentious issue, with cryptocurrency exchanges enjoying legal status in the country while the circulation of cryptocurrency lacks regulation. As Kyrgyzstan navigates the dynamic crypto landscape, the government’s tax revenue surge reflects both challenges and opportunities in this burgeoning sector.
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