Kyrgyzstan Sees Soaring Tax Revenue from Crypto Miners in 2023

In the first 11 months of 2023, the government of Kyrgyzstan witnessed a significant surge in tax revenue from cryptocurrency miners, as reported by the Finance Ministry, collecting a total of 78.6 million soms, equivalent to almost $883,000.

This marked a substantial increase compared to the previous year’s earnings.

The cryptocurrency mining tax income experienced notable fluctuations throughout 2023 in Kyrgyzstan. It ranged from 738,000 soms ($8,284) in February to a peak of 11.6 million soms ($130,212) in August.

However, by November, the last reported month, the receipts had stabilized at 7.6 million soms ($85,767) after declining from the August high.

Interestingly, there is now only one officially operating cryptocurrency mining company in the country, a stark contrast to the past when there were numerous players in the industry.

For context, in the first 11 months of 2022, crypto mining tax revenue amounted to a mere 11.1 million soms ($133,200).

The tax rate imposed on these miners is calculated at 10% of the electricity cost, inclusive of value-added and sales taxes.

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Kyrgyzstan boasts abundant water resources in the form of glaciers, high-altitude lakes, and rivers, with a combined length exceeding 35,000 km, according to government data. Despite this, many of these resources remain underdeveloped.

Cryptocurrency miners in the country heavily rely on hydropower sources for their operations.

In a significant move in July 2023, Kyrgyz President Sadyr Japarov approved the construction of a cryptocurrency mining facility at the Kambar-Ata-2 Hydro Power Plant.

It’s worth noting that crypto miners are subject to a rate that is five times higher than what the general public in Kyrgyzstan pays for electricity.

However, cryptocurrency production faced challenges in 2023 due to low water levels at dams and contractual limitations with neighboring countries, leading to the need for power imports.

At times, even the government had to source imported power, and crypto miners struggled to secure adequate imported power supplies.

By October 2023, the crypto mining industry had already consumed a substantial 17 million kilowatt-hours of electricity.

The issue of energy consumption by crypto miners has been a longstanding source of controversy.

While cryptocurrency exchanges are legal in Kyrgyzstan, the circulation of cryptocurrencies remains unregulated within the country, posing unique challenges for policymakers and regulators.

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