Miners Look Away From Kazakhstan for Growth Opportunities

Relationships between the government and miners have turned sour as electricity shortages persist.

AccessTimeIconDec 10, 2021 at 6:09 a.m. UTC
Updated Dec 10, 2021 at 4:24 p.m. UTC

Eliza Gkritsi is CoinDesk's crypto mining reporter based in Asia.

Crypto miners operating in Kazakhstan are looking to the U.S. and Russia to expand their businesses as the Kazakh government is restricting the industry in the central Asian country.

“The whole market [in Kazakhstan] has dried up so fast in terms of available capacity,” said Denis Rusinovich, co-founder of CMG Cryptocurrency Mining Group and Maverick Group, adding that he is looking into Russia to expand his operations.

Since flocks of miners from China and beyond soaked up Kazakhstan’s spare energy capacity, the government has been dealing with severe electricity shortages.

The government proposed a limit to the development of new mines of a total of 100 megawatts (MW) nationwide in October, setting an upper boundary for the potential of crypto mining growth in Kazakhstan.

Kazakh miner Didar Bekbauov of Xive said his company is planning to visit the U.S. next year to look into developing mines there.

To deal with electricity rationing, mining platform BitFuFu simply turned off its machines in Kazakhstan, left them there, and is setting up new ones in the U.S.

Bekbauov said that he thinks the regulatory environment in some U.S. states is conducive to his business and that it is unlikely his company will be subject to the treatment it had received from Kazakh authorities.

Rusinovich said that Russia’s excess capacity and diverse energy sources are a great opportunity for miners. He said that there is some geopolitical risk associated with doing business there, but that miners who follow the right procedures and establish themselves are unlikely to face unfair treatment from the government.

Broken promises

Kazakhstan’s national grid operator Kegoc (Kazakhstan Electricity Grid Operating Co.) started rationing power to mines in September. One tactic several miners mentioned was that Kegoc would shut power off to crypto mines during peak demand hours so that cities could have adequate electricity.

After protests from the industry, the minister of energy said in November that the government wouldn’t cut power to legally operating mines.

But the government quickly broke that promise. Industry sources estimate that between 200 MW and 500 MW of lawfully operating mines had their power cut off, including some of Kazakhstan’s most established operations.

Later in November, Bekbauov shut down a 2,500-rig mine in southern Kazakhstan that was operating legally because of insufficient electricity, he told CoinDesk.

Despite the regulatory limitations, not all Kazakh miners have abandoned hope. Some think that if failing power plants come back online, Kegoc’s electricity rationing policy will improve. Others hope that if they develop their own renewable energy capacity, they will be able to start to grow again.

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Eliza Gkritsi is CoinDesk's crypto mining reporter based in Asia.

CoinDesk - Unknown

Eliza Gkritsi is CoinDesk's crypto mining reporter based in Asia.

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