Kyrgyzstan’s cryptocurrency mining tax revenue surges

Cryptocurrency mining operations have made significant progress in Kyrgyzstan, a country with abundant hydropower resources. In the first 11 months of 2023, the country’s government collected a significant amount of 78.6 million soms, equivalent to approximately $883,000, from cryptocurrency miners. Compared to the 11.1 million soms (equivalent to $133,200) collected during the same period in 2022, this amount represents a significant increase. There were changes in tax receipts throughout 2023. The lowest amount was 738,000 soms ($8,284) in February, and the highest was 11.6 million soms ($130,212) in August.

One of the most important aspects of this expansion is Kyrgyzstan’s enormous water resources, which include glaciers, high-altitude lakes, and rivers stretching for more than 35,000 km. Since cryptocurrency miners mostly rely on hydroelectric power for their operations, much of these resources are not being utilized to their full potential. In fact, most owners of small hydropower plants in Kyrgyzstan are connected to the country’s cryptocurrency mining farms. This synergy between natural resources and technological innovation positions Kyrgyzstan as an emerging hotspot in the world of cryptocurrency mining, comparable to countries like Costa Rica and Paraguay that are in the process of developing their mining industries.

In July 2023, Kyrgyz President Sadir Jafarov approved the construction of a cryptocurrency mining facility at the Kambar-Ata-2 hydroelectric power plant. These developments contributed to the momentum that already existed. Through the implementation of this plan, the government demonstrates its commitment to maximizing the economic potential of natural resources. On the other hand, it is important to remember that cryptocurrency miners in Kyrgyzstan are charged five times more for electricity use than the general population.

Despite optimistic income forecasts, Kyrgyzstan’s cryptocurrency production has struggled in 2023. These challenges included low dam fill levels and restrictions on power distribution due to agreements with neighboring countries. These concerns have sometimes forced miners to import electricity, exposing challenges that still need to be addressed regarding infrastructure. Nonetheless, by early October 2023, the sector had used a significant 17 million kWh of electricity.

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