In the first 11 months of 2023, the government of Kyrgyzstan witnessed a substantial increase in tax collections from crypto miners, totaling 78.6 million soms ( $900,000).
According to reports from the Finance Ministry, which were reported by the local media on January 1, the government of Kyrgyzstan collected taxes from cryptocurrency miners totaling 78.6 million soms, or roughly $883,000, in the first eleven months of 2023.
When compared to the 11.1 million soms ($133,200) collected during the same period last year, the latest tax amount represents a significant increase. The tax revenue earned by cryptocurrency mining in Kyrgyzstan experienced a variable trend in 2023.
With the lowest income of 738,000 soms ($8,284) in February, the highest revenue of 11.6 million soms ($130,212) in August, and the lowest revenue of 7.6 million soms ($85,767) in November, the monthly revenues fluctuated greatly.
This is in sharp contrast to the past, when multiple companies were involved in this industry, as there is currently just one officially functioning cryptocurrency mining company in the nation.
Value-added and sales taxes included, the cost of power used for mining is subject to a 10% tax from the Kyrgyz government. Kyrgyzstan’s mining industry is heavily reliant on its abundant natural resources, particularly its water resources, which consist of over 35,000 km of lakes, rivers, and glaciers.
These resources, notwithstanding their general underdevelopment, make it easier to rely on hydropower for cryptocurrency mining operations. At the Kambar-Ata-2 Hydro Power Plant, Kyrgyz President Sadyr Japarov approved the construction of a cryptocurrency mining facility in July 2023. In Kyrgyzstan, cryptocurrency miners pay five times as much as average consumers.
Lower water levels in dams and restrictions on power importation because of agreements with neighboring nations were among the difficulties the industry encountered in 2023. Despite these challenges, the industry was able to use 17 million KWh of electricity by the beginning of October.
After China clamped down on the mining sector three years ago, Kyrgyzstan and Kazakhstan, its neighbor, developed into a center for mining companies.
But this spike raised the country’s need for electricity, which prompted lawmakers to impose limits on how much electricity miners could use. Kyrgyzstan has enormous potential for producing energy, with a capacity of up to 142 billion kilowatt-hours. However, only 10% of this capacity is currently being used for mining operations.
The way the government has regulated the bitcoin industry has also changed over time. In late 2021, it closed down illicit mining activities, raised miners’ electricity costs, and passed legislation in 2022 to provide a legal framework for virtual assets.
The law forbids the use of cryptocurrency for payments, taxes investment income and mining profits, and mandates that mining companies register.
