Since China outlawed cryptocurrency mining in June 2021, neighbouring country Kazakhstan had become a significant location for Bitcoin miners. The expanse of space, warehouses and factories meant that mining rigs could be easily installed and powered at a lower cost than other Bitcoin-hungry locations.
In January 2022, rising fuel prices triggered deadly riots in Almaty, Kazakhstan’s largest metropolis, with internet shutdowns being enacted and Russian-led military troops being called into the country in a bid to help stabilise the situation. As a result, 15–20% of the world’s Bitcoin mining capacity was knocked completely offline and the Bitcoin price fell to a low not seen since September 2021.
The Bitcoin mining story so far…
Since the China shutdown, the US has held the top spot, with one-third of Bitcoin’s hashrate – the computing and processing power used for Bitcoin mining – coming from the country. Kazakhstan in comparison had been in second place and responsible for 18% of the hashrate, but following the unrest this dropped to approximately 8%, according to data from BTC.com.
Cryptocurrency insights company Arcane Research estimated that the internet shutdowns across six days could have cost Kazakhstan Bitcoin miners approximately $20m (Tg8.7bn).
However, Alan Dorjiyev, president of the National Association of Blockchain and Data Centres Industry in Kazakhstan, believes that the issues experienced by Bitcoin miners in the country are now over. He says there is no threat of further internet shutdowns, but should accessibility issues occur, mining farmers are considering satellite options to ensure there is a reserve connection to the internet.
How safe is Kazakhstan’s Bitcoin mining future?
Not everyone in Kazakhstan is as positive as Dorjiyev about the future of Bitcoin mining in the country.
Almas Chukin, partner at Visor Capital Kazakhstan – an investment banking services group – says: “In general the mood is not very optimistic in the sector. Many [Kazakhstan Bitcoin miners] are looking for other places to go, mainly the US or Russia.” However, he adds that “there is a big potential in other sectors including renewable energy – particularly wind”.
In Russia, the future of Bitcoin mining remains murky, with the country’s central bank proposing a ban on cryptocurrency mining. This could potentially benefit the recovery of Kazakhstan’s Bitcoin mining sector, as bordering Russia would be the most logical place for Bitcoin miners to relocate to. However, there is no guarantee that Kazakhstan-based miners will not be willing to relocate to the US given how lucrative the activity is in the country.
Despite this uncertainty, Dorjiyev believes that the future for Kazakhstan Bitcoin mining is bright, even though the country will fall to fifth or sixth place globally when it comes to hashrates.
At the moment, Kazakhstan is watching and waiting to see just how badly damaged its status as a global hub for Bitcoin mining is. If alternative access to internet connections can be established, and Bitcoin mining is banned in Russia, this could be enough to give the sector a boost. On the other hand, until Kazakhstan is able to resolve its political unrest, the future of the country’s overall economy, its ability to attract foreign investment, and the future of its Bitcoin mining industry will all be shrouded in uncertainty.