Internet Outages Spooking Crypto Miners in Kazakhstan

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In Brief
  • Last week’s internet outage in Kazakhstan compounded growing concerns over tighter government regulations.

  • In light of these potentially diminished prospects, some miners are considering seeking a more enterprising locale.

  • Kazakhstan saw an influx of miners following China’s ban on crypto mining last year, making it the second largest center for Bitcoin mining in the world, just after the United States.

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Last week’s internet outage in Kazakhstan compounded growing concerns over tighter government regulations, according to local cryptocurrency miners.

In light of these potentially diminished prospects, some miners are considering seeking a more enterprising locale. 

During a period of social unrest last week, the Kazakh government shut down the internet in a country that has become the world’s second-largest center for mining. This caused Bitcoin’s hashrate, or global computing power, to drop around 13%. 

Since then, nearly all operations have been restored according to the National Association of Blockchain and Data Center Industry in Kazakhstan, a representative for 80% of legal mining companies in the country.

However, these resumed operations have not alleviated concerns for some, who say that they or their clients may still look to migrate to other countries. For instance, one miner who had moved his operations to Kazakhstan from China is now reconsidering transplanting once again to North America or Russia.

“Two or three years earlier, we called Kazakhstan a paradise of the mining industry because of the stable political environment and stable electricity,” said miner Vincent Liu. “We are evaluating the situation. I suppose we will keep a part of the hashrate in Kazakhstan and will move some to other countries.”

Crypto mining status in Kazakhstan

Kazakhstan saw an influx of miners following China’s ban on crypto mining last year, making it the second-largest center for Bitcoin mining in the world, just after the United States. In April last year, Kazakhstan accounted for 8% of the global hashrate. Following the events in China, miners flocking to the low energy costs more than doubled that figure to 18% by August.

Crypto miner BTC KZ co-founder Din-Mukhammed Matkenov believes that it has been this influx of Chinese miners that has worsened prospects for domestic miners by overloading the country’s limited energy supply. Other clients of his also seem indicative towards the United States and Russia.

“We think that the development and stability of the [crypto] mining industry in Kazakhstan is in danger,” Matkenov said. “It is very unstable and really hard to predict the profits to pay the electricity bill and salaries. At the moment we are close to being bankrupt and clients are trying to find other countries where they can relocate to with a more stable governmental ruling.”

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage.

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