In 2024, Kyrgyzstan experienced a sharp drop in tax revenue from cryptocurrency mining, despite the global rise in crypto valuations. Known for its abundant hydroelectric resources, the country saw a 50% decrease in tax receipts from crypto mining compared to the previous year.
How Does Kyrgyzstan Tax Crypto Mining?
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.
What's Behind the Decline?
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.
New Opportunities for Mining
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.
