Swathes of crypto miners have packed up and moved to Kazakhstan as the local industry in China endures sweeping crackdowns.
Kazakhstan — located in Central Asia bordering China and Russia — became the third-largest contributor to global Bitcoin mining hashrate in April, behind China and the US.
Data from the Cambridge Centre for Alternative Finance (CCAF) and its Bitcoin Electricity Consumption Index shows different countries and their share of mining hashrate over time.
In January 2020, China controlled a substantial 73% of Bitcoin’s global hashrate. The most recent figures show that’s fallen as low as 46%.
- Earlier this year, Beijing banned mining across the Southwest, in Sichuan, Yunnan, Xinjiang, and Inner Mongolia.
- China’s government recently spread those regulations to Henan, Anhui, and Gansu.
- 90% of Sichuan’s Bitcoin mining capacity (where most was located) is considered shut down.
Kazakhstan, on the other hand, began 2020 controlling just 3.5% of Bitcoin’s hashrate. By April 2021, it made up over 8%.
Bitcoin’s overall hashrate halved shortly after Beijing set the new rules in place. It now hovers around 43% below its peak in mid-May.
Tax Bitcoin for economic viability
While Kazakhstan is quickly becoming a crypto mining sanctuary, the country is not without its own financial and environmental concerns.
The government is introducing new tariffs next year: for every 1 KwH of energy consumed to mine crypto, 1 Kazakhstani Tenge will be charged ($0.0023 or 0.015 Chinese Yuan).
Last month, Kaszakhstan Minister for Digital Development and Innovation Bagdat Musin emphasized that Bitcoin miners could be turned off by taxes, but stressed the need for crypto to be an economically viable sector for Kazakhstan.
Musin said legalizing and taxing local crypto miners and the exchanges on which they sell their generated assets is critical to the booming industry’s sustainability.
Kazakhstan’s Bitcoin miners need coal
Kazakhstan is rich in fossil fuels. Statista highlighted the country’s coal consumption was close to 57 million tonnes in 2019 and live charts place them 13th across the globe for overall consumption. China’s first.
Indeed, the US Department of Commerce found in 2020 that Kazakhstan sourced 87% of its electricity from fossil fuels (70% just coal), 12% from hydropower, and less than 1% from solar and wind.
China depends on coal for nearly 57% of the country’s total energy mix, according to the country’s 2020 Statistical Communique on National Economic and Social Development.
Although, China announced it would be capping coal usage to 56% as of April. Beijing says its crypto mining restrictions are part of efforts of meet that goal.
According to the CCAF, Bitcoin currently consumes around 70.49 Terawatt Hours per year with an estimated high point of 183.39 TWh.
Between May and June — around when Chinese Bitcoin operations shut down — estimates where as high as 488 TWh, but in reality the network used over 75% less.
Still, Bitcoin’s yearly consumption is often compared to a small country’s electricity usage, and while it’s nearly impossible to gather realistic data from all Bitcoin miners across the world, the meme is becoming harder to ignore.
Tesla chief and Dogecoin advocate Elon Musk went as far as to withdraw the option to buy cars with Bitcoin, citing the need for more sustainably sourced electricity among miners.
Musk later announced that Tesla would start accepting Bitcoin again — but only if mining consumes a minimum of 50% of renewable energies.