Kyrgyzstan’s Crypto Mining Tax Revenue Plummets 50% Due to Rising Energy Costs

Kyrgyzstan, once a magnet for crypto miners due to its cheap power, now faces a decline in mining tax revenue, which has tumbled by 50% to approximately $535,000 in 2024. This sharp downturn stems from soaring electricity costs and a dwindling mining sector, raising concerns about the nation’s energy policies and economic strategies.

• Kyrgyzstan’s crypto mining tax revenue fell by 50% in 2024, collecting around $535,000.
• The crypto mining tax is calculated as 10% of the electricity bill, including other taxes.
• Mining operations are becoming less viable due to rising electricity costs.
• Many miners are moving to countries with more favorable conditions.
• Over 90% of Kyrgyzstan’s electricity comes from hydropower.
• Aging infrastructure and variable water levels raise electricity costs.
• Government tariff increases aim to fund infrastructure upgrades.
• Countries like Russia also face energy issues, leading to mining restrictions.

The electricity price surge, partly due to an outdated hydropower system and its heavy reliance on water sources like rivers and dams, has slashed the profitability of Kyrgyzstan’s crypto mining industry. As a result, miners are increasingly seeking refuge in countries offering more stable and affordable energy prices.

“The cryptocurrency mining tax contributed about $535,000 in taxes to the country’s economy.”

This reliance on hydropower — responsible for generating over 90% of the country’s electricity — is proving costly. Over half of the infrastructure shows signs of wear, necessitating costly maintenance and improvements. In response, the government has raised electricity tariffs, hoping to address these financial and infrastructural shortcomings but inadvertently setting back the mining sector.

Kyrgyzstan’s situation is a telling example of the risks faced by industries tied to volatile energy resources and outdated infrastructure. It’s a scenario mirrored in Russia, where similar energy dilemmas have prompted seasonal mining restrictions.

Key Questions and Takeaways

• Why has Kyrgyzstan’s crypto mining tax revenue declined in 2024?

The decline results from rising electricity costs and reduced mining activity.

• What factors have contributed to the rise in electricity costs in Kyrgyzstan?

Key factors include aging hydropower infrastructure, fluctuating water levels, and increased tariffs.

• How has the rise in electricity costs affected Kyrgyzstan’s crypto mining industry?

Higher costs have decreased profitability, prompting reduced operations and relocations.

• What measures has the Kyrgyz government taken to address the energy sector challenges?

They have raised tariffs to tackle financial shortfalls and fund necessary infrastructure improvements.

Despite these daunting short-term challenges, Kyrgyzstan’s mining sector may find hope in diversifying its energy sources. The Central Asia-South Asia power project (CASA-1000) is a promising initiative aiming to secure the region’s energy future by connecting Kyrgyzstan with electricity-exporting countries, potentially revitalizing the beleaguered mining industry.