Kyrgyzstan’s Crypto Mining Tax Revenue Falls 50% to Only $500K in 2024: Report
According to a local report, Kyrgyzstan, a Central Asian country renowned for its crypto mining industry, has witnessed a significant decline in mining tax revenue, with the government collecting 50% less in 2024 compared to the previous year.
In the latest budget report, Kyrgyzstan received 46.6 million soms (approximately $512,600) in cryptocurrency mining tax, whereas in 2023, it had received 93.7 million soms (approximately $1 million). In Kyrgyzstan, the cryptocurrency mining tax rate is set at 10% of the electricity bill.
The decline in tax revenue can be attributed to a combination of factors, including the rise in electricity costs, which has made crypto mining less profitable. As energy prices continue to increase, many miners have scaled down their operations or relocated to countries with more favorable conditions. This decline in mining activity has severely impacted the government’s ability to generate revenue from the crypto mining sector.
In December, Kyrgyzstan urged its residents to reduce their electricity usage due to the record-high winter demand.
These challenges not only burden households and industries but also contribute to the decline in tax revenues from the once-thriving crypto mining sector. Crypto mining, which involves validating cryptocurrency transactions and adding them to a blockchain, requires significant computational power and, consequently, a large amount of electricity.
Kyrgyzstan’s historically low energy costs had made it an attractive destination for mining operations, attracting both domestic and international players. These operations had generated substantial tax revenues for the government, as crypto miners were subject to specific taxation policies.
The rising electricity costs can be attributed to several structural challenges faced by Kyrgyzstan’s energy sector. The country heavily relies on hydropower, which accounts for over 90% of its electricity generation, as per data from the World Bank. However, aging hydropower infrastructure and fluctuating water levels have limited its capacity to meet the growing demand. Additionally, Kyrgyzstan imports electricity during peak consumption periods, thereby exposing the country to global energy price fluctuations.
In recent years, the government has implemented higher tariffs to address financial shortfalls in the energy sector and fund infrastructure upgrades. While these measures are necessary for long-term sustainability, they have made electricity less affordable for crypto miners.
To tackle energy concerns, some countries like Russia have implemented seasonal restrictions in key mining areas to prevent power outages.