In 2024, Kyrgyzstan experienced a sharp drop in tax revenue from cryptocurrency mining, despite the global rise in crypto valuations. The nation, known for its abundant hydroelectric resources, saw tax receipts from crypto mining fall by 50% compared to the previous year.
According to a report by the Ministry of Economy and Finance, Kyrgyzstan collected just 46.6 million Kyrgyzstani soms (around $535,000) in mining taxes this year, a significant decrease from the 93.7 million soms ($1.08 million) collected in 2023.
The decline was evident early on, with a 29.7% drop in revenue during the first seven months of 2024 compared to the same period in 2023.
Kyrgyzstan imposes a 10% tax on the electricity used by crypto miners, which also includes value-added tax (VAT) and sales tax. This taxation model initially helped boost revenue, particularly during the early stages of 2023.
Back then, the country reported a dramatic increase in mining taxes, collecting 78.6 million soms ($883,000) in the first few months, far exceeding the 11.1 million soms ($133,200) collected during the same period in 2022.
The reasons for the sharp drop in mining tax revenue remain unclear. Some suggest that regulatory uncertainties or reduced mining activity may have contributed.
Additionally, Kyrgyzstan’s affordable hydroelectric power has made it an attractive place for crypto miners, but recent changes in energy policies or costs may have impacted the sector.
Despite the fall in tax revenue, there are ideas worldwide to improve crypto mining. In Germany, for example, miners use extra renewable energy to power Bitcoin operations, which helps reduce energy waste and stabilize power grids.
Countries like Kyrgyzstan could explore similar solutions to boost the sector while supporting their economy.
This decline in tax revenue is a challenge for Kyrgyzstan, but it also opens doors to rethink strategies and create a more sustainable future for cryptocurrency mining.
Crypto mining is the process of using computational power to verify transactions and secure a blockchain network in exchange for cryptocurrency rewards.
The most profitable cryptocurrency to mine varies, but Bitcoin, Ethereum (if not Proof-of-Stake), and Litecoin are among the top choices depending on market conditions.
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