Kazakhstan unrest – crypto mining ‘could recover soon’

By Raffaele Redi
• Updated

Tokayev says ‘constitutional order mainly restored in all regions’

Kazakhstan political map with capital Astana, national borders, important cities, rivers and lakes. Republic in Central Asia and the worlds largest landlocked country. English labeling. Illustration.                                 
A witness says most miners are far from the area where protests are taking place – Photo: Shutterstock

After the decision to shut down the internet by Kazak president Kassym-Jomart Tokayev during the demonstrations against rising energy prices, bitcoin and ether hash rates fell drastically – and so have crypto prices.

Cryptocurrencies are thought to be one of the origins of the protests. After China’s mining ban, many small and medium-sized mining outfits migrated to Kazakhstan, causing the local power grid to collapse and driving energy prices higher.

A second migration wave to Russia or the US appears difficult as there is still a degree of uncertainty on the future of cryptos in Moscow, while the cost of relocating a factory to the US would be prohibitive.

Confident mining will continue

Didar Bekbau, a bitcoin miner who had to close his Kazakhstan factory after the power shortages, say he is confident that all mining operations will be restored.

He wrote in a Tweet: “Main problem for miners is blocked internet. The government tries to control communications and only allows internet connection for a couple of hours during the day. After everything settles down and internet recovers, miners should be all right. Hope it doesn’t take a long time.

“Mostly riots are in the south of the country, whereas mining is concentrated in central and north part. It is quite a safe situation for mining locations and facilities.”

Bekbau said power rationing was continuing. “During peak hours electricity supply is limited, usually between 6pm and 11pm. After the winter season ends, stability of supply should be better, because of less consumption from households,” he added.

Relocation too expensive

“Relocation from Kazakhstan to the US is very expensive when all the costs are summed up. Relocation to Russia is possible, but the pace of deployment of new facilities in Russia is very low compared to the US. Mostly ASICs [mining rigs] stay inside Kazakhstan.”

He explained that Kazakhstan had huge potential for power generation. “Both traditional energy sources and renewables. As long as the country has political stability and can attract foreign capital,” he said.

“Kazakhstan’s political stability is important for Russia, China and the United States. The government realised new political and economic reforms are needed. So I’m quite optimistic about the future of the country.”


‘Order restored’

President Kassym-Jomart Tokayev claimed that “constitutional order has been mainly restored in all regions” after announcing the arrival of Russian forces, which were called in to help local forces.

“But terrorists are still using weapons, causing damage to civilian property. Therefore, counter-terrorist operations will continue until the total destruction of the militants,” he said. Tokayev has now issued a shoot-to-kill order for rioters.

Recently the president underlined the need to regulate crypto activities, saying they were “not contributing to Kazakhstan economy”. A ban is possible, but regulation seems to be the most likely solution.

Russia trying to attract miners

Meanwhile, the Russian Blockchain Association (RACIB) is trying to attract miners in a bid to overtake the US, currently the biggest crypto-miner in the world by hash rate.

However, there seems to be a lot of uncertainty on the future of cryptos in Russia.

“Cheap electricity with a low carbon footprint is an important competitive advantage for Russia in the fight to attract mining companies to its territory,” said Valery Petrov, vice-president of the Russian Association for Cryptoeconomics, Artificial Intelligence and Blockchain (RACIB).

“No matter how we treat cryptocurrencies and everything connected with them, this is already a significant share of the global economy.”

Nevertheless, as RACIB reported, the central bank of the Russian Federation has come out in favour of a complete ban on investment in cryptocurrencies.

“The central bank sees risks to financial stability with an increase in the number of such transactions. In the near future, the regulator will reflect its position in an advisory report on cryptocurrencies, which is now being prepared,” said RACIB.

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