Kyrgyzstan's government has reported a significant increase in tax revenue from cryptocurrency miners during the first 11 months of 2023. The country, known for its untapped hydroelectric capacity, has potential as a future mining powerhouse. However, progress in leveraging this capacity has been slow. The tax revenue collected from crypto miners in Kyrgyzstan witnessed volatility throughout 2023, with a notable rise compared to the previous year.


Key Points:

  • Tax Revenue Surge: Kyrgyzstan's Finance Ministry revealed that the government collected 78.6 million soms (approximately $883,000) in taxes from cryptocurrency miners during the first 11 months of 2023. This figure represents a substantial increase over the tax revenue generated in the same period of the previous year.

  • Volatility in Crypto Mining Tax Revenue: The tax revenue from crypto mining in Kyrgyzstan exhibited volatility throughout 2023. Monthly receipts ranged from 738,000 soms ($8,284) in February to 11.6 million soms ($130,212) in August. In November, the reported tax revenue was 7.6 million soms ($85,767), indicating a stabilization after the August peak.

  • Tax Rate and Calculation: The tax rate applied to crypto miners in Kyrgyzstan is 10% of the cost of electricity, including value-added and sales taxes. The taxation is linked to the energy consumption of mining operations, reflecting the government's approach to capturing a portion of the revenue generated by the sector.

  • Hydroelectric Potential: Kyrgyzstan possesses significant water resources, including glaciers, high-altitude lakes, and rivers. However, the full potential of these hydroelectric resources remains underdeveloped. Crypto miners in the country predominantly rely on hydropower for their operations.

  • Challenges and Industry Developments: Crypto mining in Kyrgyzstan faced challenges in 2023, including low fill levels at dams and delivery limitations due to contracts with neighboring countries. The government approved the construction of a crypto mining facility at the Kambar-Ata-2 Hydro Power Plant in July 2023. Miners in Kyrgyzstan experienced difficulties in sourcing imported power, impacting the industry.

  • Energy Controversy: The use of energy by crypto miners has been a source of controversy globally. While cryptocurrency exchanges are legal in Kyrgyzstan, the circulation of cryptocurrencies remains unregulated in the country.

Conclusion: Kyrgyzstan's increased tax revenue from cryptocurrency miners reflects the growing economic significance of the sector within the country. The focus on leveraging untapped hydroelectric capacity for crypto mining operations aligns with global efforts to address energy concerns associated with cryptocurrency production. The government's initiatives and industry developments will likely shape the trajectory of the crypto mining sector in Kyrgyzstan in the coming years, impacting both economic and environmental considerations.


(DEREK ANDERSEN, COINTELEGRAPH, 2023)