Kazakhstan’s Energy Framework and Digital Mining
Kazakhstan is set to advance its energy framework by exploring the integration of digital mining, aiming to extend cryptocurrency exchanges beyond the confines of the Astana International Financial Centre (AIFC). In a recent opinion piece for Kazakhstanskaya Pravda, Kanysh Tuleushin, the First Vice Minister of Digital Development, Innovation, and Aerospace Industry, elaborated on a governmental initiative to leverage digital mining as a means of revamping the nation’s energy infrastructure while enhancing operational efficacy.
Financing Model Proposal
The initiative includes a proposal for a “70/30” financing model that seeks to attract foreign investment aimed at upgrading thermal power facilities. Under this plan, 70% of the enhanced energy output would feed into the national grid, with the remaining 30% earmarked for mining activities. Tuleushin drew parallels to the United States, where cryptocurrency miners aid in balancing the electric grid by consuming surplus energy during times of low demand, suggesting that Kazakhstan could mimic this strategy to utilize mining farms as stabilizing forces within its energy system.
Utilizing Associated Petroleum Gas
Moreover, Tuleushin introduced the idea of harnessing associated petroleum gas—a common byproduct in oil extraction that is frequently flared off—as a source for electricity generation to power mining farms. This approach not only promises to mitigate environmental damage but also opens additional revenue channels for oil producers.
Economic Impact and Growth in Digital Mining
Over the past three years, digital mining has reportedly brought in $34.6 million in tax revenue to the Kazakhstani economy. Since the start of 2023, the country has registered upwards of 415,000 mining devices, granted 84 operational licenses, and recognized five mining pools, indicating a robust growth trajectory in this sector.
Cryptocurrency Trading Regulations
In tandem with its mining initiatives, Kazakhstan is contemplating a broader rollout of cryptocurrency trading regulations, which at present are limited to the AIFC. The trading volume for digital assets at AIFC exchanges saw a significant increase from $324.2 million in 2023 to a projected $1.4 billion in 2024. However, estimates suggest that Kazakhstan’s total digital asset transactions could reach $4.1 billion for 2023, with a staggering 91.5% of activity occurring without regulatory oversight.
“If all existing restrictions were lifted, and digital asset trading expanded nationwide, the economic benefits could be considerable,” stated Tuleushin.
He noted that more flexible regulatory measures could attract substantial investors, akin to developments seen in the UAE, potentially positioning Kazakhstan as the central hub for cryptocurrency in Central Asia, alongside competitors like Uzbekistan and Kyrgyzstan. Lifting current limitations could channel billions of tenge into public finances, with just a 10% tax potentially yielding over 190 billion tenge annually (approximately $372.9 million), sufficient to fund numerous new educational and healthcare infrastructures.
Future Developments
To facilitate this shift, Tuleushin proposed the need for adaptable crypto trading regulations outside the AIFC, and mentioned that the Ministry of Digital Development is collaborating on projects to create transparent cryptocurrency exchanges and automated teller machines (ATMs) for digital assets. However, such advancements would necessitate an alignment with the National Bank and the Financial Market Regulation Agency.
Digital Tenge and Financial Transparency
Additionally, Kazakhstan is looking to bolster the utilization of its digital tenge, a central bank digital currency (CBDC) aimed at ensuring comprehensive tracking of government spending. Thus far, the pilot program for the digital tenge has issued 250 billion units, employing special digital tags for spending monitoring, reinforcing the country’s financial transparency efforts.
