Problems and Prospects of State Regulation of Cryptomining in Kazakhstan

Beimbet Mussin; Aigul  Kosherbayeva; Nurzhan  Kuandykov; Salamat  Yegeubayeva; Zukhra  Mussina

doi:10.5755/j01.ppaa.53.1.35833

Authors

Beimbet Mussin Student
Aigul Kosherbayeva
Nurzhan Kuandykov
Salamat Yegeubayeva
Zukhra Mussina

DOI:

https://doi.org/10.5755/j01.ppaa.53.1.35833

Keywords:

state regulation, cryptocurrency mining, content analysis, energy security, taxation framework, information agenda

Abstract

The cryptocurrency mining sector in Kazakhstan has witnessed remarkable expansion, attracting global miners due to favourable conditions. However, this growth has underscored the country's energy scarcity, leading to the enforcement of stringent regulations by the government. This article seeks to offer a thorough comprehension of the regulatory framework governing cryptocurrency mining in Kazakhstan. Examining diverse aspects such as the legal status of mining, licensing structures, tax considerations, and the impact on energy infrastructure, the study utilizes international experiences and stimulus materials. Through the analysis of media representation and examination of primary trends, it is revealed that while the government has addressed legal gaps and instituted transparent tax procedures, taxing digital mining may discourage foreign investments, given the industry's current fragility due to excessive regulations. The article provides insights into the regulatory landscape, emphasizing challenges and opportunities.

References

adilet.zan.kz. 2023. “On Approval of the Rules for Licensing Digital Mining Activities.” Adilet.zan.kz. April 2023. https://adilet.zan.kz/rus/docs/V2300032431.

adilet.zan.kz. 2023. “On Digital Assets in the Republic of Kazakhstan - ‘Adilet’ LIS.” Adilet.zan.kz. https://adilet.zan.kz/eng/docs/Z2300000193.

Afzal, Ayesha. 2019. “Cryptocurrencies, Blockchain and Regulation: A Review.” THE LAHORE JOURNAL of ECONOMICS 24 (1): 103–30. doi:https://doi.org/10.35536/lje.2019.v24.i1.a5.

akorda.kz. 2020. “The President of Kazakhstan Took Part in a Working Meeting of the Council of Foreign Investors.” Akorda.kz. November 18, 2020. http://www.akorda.kz/ru/events/akorda_news/meetings_and_sittings/prezident-kazahstana-prinyal-uchastie-v-rabochei-vstreche-soveta-inostrannyh-investorov.

Aleksey Anatolyevich Maksurov. 2018. “Mining as Juridical and Information Category.” Actual Problems of Economics and Law 12 (2):256-265. https://doi.org/10.21202/1993-047x.12.2018.2.256-265.

Arslanian, Henri. 2022. “Bitcoin and Crypto Mining.” The Book of Crypto, 259–276. https://doi.org/10.1007/978-3-030-97951-5_14.

Bhatnagar, Mukul, Sanjay Taneja, and Ramona Rupeika-Apoga. 2023. “Demystifying the Effect of the News (Shocks) on Crypto Market Volatility.” Journal of Risk and Financial Management 16 (2): 136. https://doi.org/10.3390/jrfm16020136.

Calvão, F. 2018. “Crypto-miners: Digital Labor and the power of Blockchain technology,” Economic Anthropology, 6(1), pp. 123–134. Available at: https://doi.org/10.1002/sea2.12136.

Cambridge Bitcoin Electricity Consumption Index (CBECI). 2023. Ccaf.io. 2023. https://ccaf.io/cbeci/mining_map.

Catalini, Christian, and Joshua S. Gans. 2019. “Some Simple Economics of the Blockchain.” SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2874598.

Ershova, and Trofimova. 2019. “Mining and business activities: in search of the balance.” Actual Problems of Russian Law 6 (6): 73–82. https://doi.org/10.17803/1994-1471.2019.103.6.073-082.

Halaburda, Hanna, and David Yermack. 2023. “Bitcoin Mining Meets Wall Street: A Study of Publicly Traded Crypto Mining Companies.” NBER WORKING PAPER SERIES, February. https://doi.org/10.3386/w30923.

Halaburda, Hanna, and David Yermack. 2023. “Bitcoin Mining Meets Wall Street: A Study of Publicly Traded Crypto Mining Companies.” SSRN Electronic Journal. doi:https://doi.org/10.2139/ssrn.4340013.

Haqshanas, Ruholamin. 2023. “Crypto Mining Entities in Kazakhstan Paid $7 Million in Taxes in 2022 – next Crypto Hub?” Cryptonews.com. May 8. https://cryptonews.com/news/crypto-mining-entities-kazakhstan-paid-7-million-taxes-2022-next-crypto-hub.htm.

Kazakhstan Today. 2023. “Analysts Predict Peak Electricity Shortage in Kazakhstan in 2029.” www.kt.kz. https://www.kt.kz/rus/ekonomika/_1377946930.html.

Korzhova. 2023. “The Concept of Legal Regulation of Mining.” Law and State: Theory and Practice 1 (217): 88–95. https://doi.org/10.47643/1815-1337.2023_1_88.

Liu, Feng, Linlin Wang, Deli Kong, Chen Shi, Zhefu Feng, Jiashen Zhou, Jiaqi Liu, and Zhibin Li. 2023. “Is There More to Bitcoin Mining than Carbon Emissions?” Heliyon 9 (4): e15099. doi:https://doi.org/10.1016/j.heliyon.2023.e15099.

Liz Guinan. 2023. “The Future of Crypto-Asset Mining: The Inflation Reduction Act and the Need for Uniform Federal Regulation.” Sustainable Development Law & Policy 23 (2). https://digitalcommons.wcl.american.edu/sdlp/vol23/iss2/2.

Ministry of Digital Development, Innovations and Aerospace Industry of the Republic of Kazakhstan. 2022. “Https://Www.gov.kz/Memleket/Entities/Mdai/Documents/Details/299113?Lang=Ru.” Gov.egov.kz. April. https://www.gov.kz/memleket/entities/mdai/documents/details/299113?lang=ru.

Ministry of Digital Development, Innovations, and Aerospace Industry of the Republic of Kazakhstan. 2022. “Https://Www.gov.kz/Memleket/Entities/Mdai/Documents/Details/299113?Lang=Ru.” Gov.egov.kz. April 26, 2022. https://www.gov.kz/memleket/entities/mdai/documents/details/299113?lang=ru.

Ministry of Energy of the Republic of Kazakhstan. 2022. “Https://Www.gov.kz/Memleket/Entities/Energo/Press/News/Details/443159?Lang=Ru.” Gov.egov.kz. October. https://www.gov.kz/memleket/entities/energo/press/news/details/443159?lang=ru.

Oleander, N.V. 2015. “Forensic Characterization of Electronic Payment Means and Systems.” LEX RUSSICA. 10 (2015): 128–136. https://doi.org/10.17803/1729-5920.2015.107.10.128-138.

PricewaterhouseCoopers. 2023. “A Tax on Digital Mining Has Been Introduced in Kazakhstan.” PwC. Accessed April 4. https://www.pwc.com/kz/en/pwc-news/ta-reports/tax-legal-alert-fy19/100-november-2021.html.

Quarterly reports | Analytics | JSC ‘KOREM’ (Kazakhstan operator of the electricity and capacity market). n.d. www.korem.kz Accessed August 12, 2023. https://www.korem.kz/rus/analitika/kvartalnye_otchety/.

State revenue committee Ministry of finance of the RoK. 2023. “Https://Www.gov.kz/Memleket/Entities/Kgd/Press/News/Details/505417?Lang=Ru.” Gov.egov.kz. February. https://www.gov.kz/memleket/entities/kgd/press/news/details/505417?lang=ru.

Steer, Killian. 2018. “Cryptocurrency Mining: The Challenges It Faces and How Regulations Can Help.” Carolina Law Scholarship Repository. 2018. https://scholarship.law.unc.edu/ncjolt/vol20/iss5/9.

Swain, Smarak. 2023. “Design Options for Pollution Tax on Mining of Crypto Assets.” SSRN, July. http://dx.doi.org/10.2139/ssrn.4531983.

The White House. 2023. “The DAME Tax: Making Cryptominers Pay for Costs They Impose on Others | CEA.” The White House. March 2023. https://www.whitehouse.gov/cea/written-materials/2023/05/02/cost-of-cryptomining-dame-tax/.

Thomson, Jeff. 2020. “Tragedy of the Energy Commons: How Government Regulation Can Help Mitigate the Environmental and Public Health Consequences of Cryptocurrency Mining.” Seattle University School of Law Digital Commons. https://digitalcommons.law.seattleu.edu/sjteil/vol11/iss1/4.

Zhang, Laney. 2022. “China: National Development and Reform Commission Issues Notice Restricting Cryptocurrency Mining.” Library of Congress, Washington, D.C. 20540 USA. February 8, 2022. https://www.loc.gov/item/global-legal-monitor/2022-02-08/china-national-development-and-reform-commission-issues-notice-restricting-cryptocurrency-mining/.