Kyrgyzstan’s Crypto Mining Tax Revenue, Energy Challenges in 2023

During the first eleven months of 2023, the government of Kyrgyzstan collected 78.6 million soms, which is equivalent to roughly $883,000, in taxes from cryptocurrency miners. Local press reports cited the Finance Ministry as the source of this information.

The revenue from the previous year was significantly lower than that. The amount of tax revenue generated by cryptocurrency mining in Kyrgyzstan fluctuated in 2023, ranging from 738,000 soms ($8,284) in February to 11.6 million soms ($130,212) in August.

After decreasing from an all-time high in August, receipts leveled off at 7.6 million soms ($85,767) in November, the most recent month for which data was available.

In Kyrgyzstan, there were formerly a large number of cryptocurrency mining companies, however, there is currently only one company that is officially active in the country. The tax revenue from cryptocurrency mining during the first eleven months of 2022 amounted to 11.1 million soms ($133,200).

The government of Kyrgyzstan claims that the tax rate equals ten percent of the cost of power when value-added and sales taxes are considered. The government of Kyrgyzstan claims that the country possesses enormous water resources in the form of glaciers, high-altitude lakes, and rivers, which together have a total length of more than 35,000 kilometers.

However, the majority of these water resources are still in a state of extreme underdevelopment. Hydropower is essential for cryptocurrency miners in the country. A cryptocurrency mining facility is scheduled to be constructed in the Kambar-Ata-2 Hydro Power Plant in July 2023, according to the approval of Kyrgyz President Sadyr Japarov.

In Kyrgyzstan, cryptocurrency miners are subject to a rate that is five times greater than the general population. The low fill level at dams and delivery limits brought about by contracts with nearby countries hampered the production of cryptocurrencies in 2023. Miners imports power, and so did the government at times.

There were moments when the cryptocurrency miner in Kyrgyzstan had trouble just locating imported power. Despite this, by the beginning of October 2023, the industry had already consumed 17 million KWh of electricity to power its operations.

The utilization of energy by cryptocurrency miners has been a contentious issue for many years. Furthermore, despite the permission of cryptocurrency exchanges, there is no control over the circulation of cryptocurrencies in the country.