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Kazakhstan

Kazakhstan Allows Registered Crypto Exchanges to Open Accounts at Local Banks

17/06/2022 by Idelto Editor

Kazakhstan Allows Registered Crypto Exchanges to Open Accounts at Local Banks

Government officials in Kazakhstan have approved regulations that will govern interactions between authorized coin trading platforms and traditional financial institutions. The new rules will allow registered cryptocurrency exchanges to have bank accounts in the country.

Pilot Project to Develop Kazakhstan Into Regional Crypto Hub

Regulations allowing crypto exchanges registered at the Astana International Financial Center (AIFC) to be serviced by second-tier banks in Kazakhstan have been adopted by a working group comprised of representatives of the Ministry of Digital Development, the central bank, financial regulators, as well as members of the financial and digital asset sectors, the ministry announced.

The initiative is part of a project aimed at introducing a regulatory framework that will facilitate the development of Kazakhstan’s potential as a regional crypto hub. It will be implemented as a pilot throughout 2022 with the participation of crypto trading platforms licensed by the AIFC Financial Services Authority (AFSA), a press release detailed.

Kazakhstan attracted cryptocurrency miners when China cracked down on the industry in May last year. According to Digital Development Minister Bagdat Musin, however, the crypto industry is not only mining but also includes crypto exchanges, digital wallets, and other blockchain platforms. The high-ranking government official elaborated:

It is like other industries, which can and should work for the benefit of our economy. We must make money on crypto exchange — this is the next level of development of financial technologies.

Musin insisted that the Central Asian nation needs to create a full-fledged ecosystem so that the digital assets extracted using Kazakhstan’s electricity are traded on local exchanges and the respective income remains in the country.

The Digital Ministry emphasized that the pilot project will allow the regulated trading of digital currencies, which will ensure proper protection for both retail and professional investors. If its implementation is successful, the authorities in Nur-Sultan plan to introduce amendments to the country’s legislation and the acts governing the AIFC.

The AIFC Financial Services Regulatory Committee is now the only body overseeing activities of fintech firms in Kazakhstan, AFSA Director Nurkhat Kushimov pointed out. All entities applying for a license are thoroughly checked and supervised, he stressed. “Our goal is to create an environment in which only trustworthy and stable companies that enjoy the trust of customers would operate,” the official stated.

The positive development for the local crypto industry comes after a recent statement by the National Bank of Kazakhstan which announced it’s closely following the market while noting it’s too early to talk about legalization of cryptocurrencies. At the same time, the monetary authority said it intends to capitalize on the potential for innovation that crypto technologies offer.

Do you expect Kazakhstan to adopt more crypto-friendly regulations in the future? Tell us in the comments section below.

Filed Under: accounts, AIFC, bank accounts, Banks, crypto, crypto exchanges, crypto mining, Cryptocurrencies, cryptocurrency, English, Exchanges, Kazakhstan, Miners, Mining, News Bitcoin, Regulations, rules

Former CEO of Crypto Exchange Wex Dmitry Vasiliev Reportedly Detained in Croatia

01/06/2022 by Idelto Editor

Former CEO of Crypto Exchange Wex Dmitry Vasiliev Reportedly Detained in Croatia

Dmitry Vasiliev, co-owner and former chief executive of the now defunct Russian crypto exchange Wex, has been arrested upon entering Croatia, local media reported. The crypto entrepreneur is wanted by Kazakhstan where he is accused of stealing money from an investor.

Wex Executive Vasiliev Apprehended at the Airport in Zagreb

Belarus-born Dmitry Vasiliev, former CEO of Wex, once the largest crypto trading platform in the former-Soviet space, has been detained at Franjo Tudjman Airport in the Croatian capital on Wednesday, May 25, the Jutarnji List reported.

According to the daily, the authorities in Zagreb have acted on a red warrant issued by Interpol on a request from Kazakhstan. Vasiliev, who resides in the Russian Federation, is wanted in the Central Asian country for defrauding an investor of $20,000.

Kazakhstan’s law enforcement has been seeking Vasiliev’s extradition for some time, but the crime he is accused of there is relatively minor compared to other suspected offenses. Wex went bankrupt in 2018 and according to estimates by a group of users, the total losses exceed $400 million.

The news of Vasiliev’s detention in Croatia comes after in September last year, the Polish press revealed he had been arrested at the Warsaw airport in mid-August and was awaiting extradition to Kazakhstan. In December, it was reported he had returned to Russia following his release.

The crypto businessman was also temporarily apprehended in Italy some two years ago, but Italian authorities let him go after several weeks, citing faults in the extradition request. He was able to return to St. Petersburg, Russia’s second-largest city, where he lives.

In March 2022, the Russian Ministry of Internal Affairs announced the arrest of a man accused of stealing financial assets from a cryptocurrency exchange. While neither the person nor the platform were identified, a report suggested this was Aleksey Bilyuchenko, another Wex co-founder.

In 2017, Wex was established as successor of the infamous BTC-e exchange which had closed down earlier that year after the arrest in Greece of one of its alleged operators, Alexander Vinnik. The U.S. accuses him of laundering up to $9 billion through the trading platform. Vinnik was extradited to France, where he was sentenced to five years in prison in December 2020, and is also wanted by Russia.

Do you think Dmitry Vasiliev will be released again by the authorities in Croatia? Tell us in the comments section below.

Filed Under: Arrested, belarusian, BTC-e, ceo, croatia, Croatian, crypto, crypto exchange, Cryptocurrencies, cryptocurrency, detained, Dmitry Vasiliev, English, Exchange, Exchanges, Executive, Fraud, INTERPOL, Kazakhstan, News Bitcoin, owner, russian, Theft, Vasiliev, Wex

Kazakhstan Police Shut Down Another Crypto Farm Amid Ongoing Crackdown on Mining

22/03/2022 by Idelto Editor

Kazakhstan Police Shut Down Another Crypto Farm Amid Ongoing Crackdown on Mining

Law enforcement officers in Kazakhstan have busted another mining facility as they continue to crack down on illegal activities in the sector. The crypto farm, located at a railway station, is the latest targeted mining operation in the country which has been struggling with its power deficit.

Authorities in Kazakhstan Seize Over 100 Mining Rigs From Unauthorized Farm

Kazakhstan, a crypto mining hotspot since last year, has been trying to limit operations in its crypto mining sector which expanded rapidly after China launched an offensive against the industry in May 2021. The government has been mostly going after illegal miners this year, although the energy-hungry industry as a whole has been blamed for electricity shortages and blackouts.

After recently closing down more than 100 crypto farms, including registered mining entities which, according to an official announcement, “voluntarily” halted their activities, law enforcement officials have conducted a raid on another facility minting digital currencies. The farm was set up in a room on the premises of the Kundyzdy railway station, 24 Khabar reported.

According to the country’s Transport Police Department, which carried out the search, the officers found 130 crypto mining units as well as hard drives and spare parts. The mining equipment has been seized and a pre-trial investigation has been launched, a high-ranking police official told the news outlet. Quoted by the department’s press service, he noted:

Other information in accordance with Article 201 of the Criminal Procedure Code of the Republic of Kazakhstan is not subject to disclosure.

Initially a promising destination for crypto miners moving out of China, thanks to its capped electricity rates, Kazakhstan has in the past weeks begun to target mining operations as part of efforts to deal with its growing energy deficit. A number of illegal farms were unplugged from the grid and many registered companies were hit by power cuts in the cold winter months. Local media has covered the crackdown.

In February, President Kassym-Jomart Tokayev ordered the Financial Monitoring Agency to identify all mining entities with the help of other relevant government bodies. The watchdog has carried out numerous inspections, verifying tax, customs, and technical documentation.

Political turmoil in January and persisting power supply interruptions have already forced some mining companies to relocate to other countries such as the U.S. In late February, the National Association of Blockchain and Data Center Industry revealed that authorized miners had already moved a third of their equipment out of the country and warned that Kazakhstan could lose its leading position in terms of computing power in the bitcoin network.

Do you think the authorities in Kazakhstan will continue to clamp down on the crypto mining sector? Share your expectations in the comments section below.

Filed Under: blackouts, Crackdown, crypto, crypto farm, crypto farms, crypto miners, crypto mining, Cryptocurrencies, cryptocurrency, Electricity, Energy, English, inspections, Kazakhstan, Miners, Mining, News Bitcoin, operation, power deficit, Raid, shortages

Once A Promised Land For Bitcoin Miners, Kazakhstan Is Shifting The Regulatory Crosswinds

01/03/2022 by Idelto Editor

Following a ban on Bitcoin mining in China, many operations fled to neighboring Kazakhstan. Now, changing regulations raise questions about their future.

Bitcoin’s hash rate is hovering around all-time highs, but many miners are still struggling to recover from regulatory changes in regions that became major hubs for the industry.

During the summer of 2021, China’s bitcoin mining ban catalyzed a 50% drop in hash rate in the span of barely two months. But on February 15, Bitcoin’s hash rate topped 210 exahashes (EH) for the first time ever. This record amount of computing power dedicated to securing the network marks a roughly 30% increase from Bitcoin’s hash rate peak in 2021, before China banned mining.

By only looking at Bitcoin’s rising hash rate, it can easily be inferred that the mining industry has recovered from China’s ban. But hash rate recovery hides the ongoing struggles of many miners who labored to relocate outside of China and now face a fresh round of regulatory headaches and operational challenges elsewhere in Asia.

Moving To Kazakhstan

Kazakhstan has historically been a popular and welcoming destination for Bitcoin miners. In July 2020, the Kazakh government estimated that roughly 14 full-scale cryptocurrency mining farms were operational inside its borders. And government ministers have regularly made public statements about the hundreds of millions of dollars they expected to flow into Kazakhstan’s cryptocurrency mining sector.

Following China’s mining ban, some estimates reported that Kazakhstan’s share of Bitcoin hash rate more than doubled in three months, from roughly 10% in June 2021 to 22% in August as exiled miners relocated to Central Asia. Other miners (discussed later in this article) with existing operations in the region planned to accelerate the country’s mining growth even more by announcing significant operational expansions.

But Kazakhstan has struggled to cope with the surge of new mining activity since China’s ban. In the wake of China’s mining ban, the Kazakh government has implemented some acutely painful changes to its energy regulations and is restricting growth of Bitcoin mining in the country. These changes aimed at controlling new mining activity are forcing many miners to start once again searching for a new home.

Evolving Regulations

After being historically welcoming, Kazakhstan’s government took a series of steps that have made life increasingly difficult for Bitcoin miners over the past eight months. Regulatory changes started in June 2021 when the president signed into law a tax code amendment that would tax cryptocurrency mining for the first time ever starting in January 2022.

Throughout the summer, Kazakhstan suffered power shortages and some complete blackouts in Almaty, its largest city. News reports blamed harsh summer heat and surges in demand for air conditioning for the electricity problems. But in September, local news outlet Kazakhstan Today published an article titled, “Electricity Shortage Arose In Kazakhstan Due To Cryptocurrency Mining.”

And although not entirely due to that one article, from that point the narrative around Kazakhstan’s electricity problems changed to focus significantly on Bitcoin mining.

A month later, the Kazakh Energy Ministry introduced for public discussion changes to power consumption rules for miners, which, among other things, would limit total capacity for new mining centers to 100 megawatts (MW). While these changes were being discussed, multiple mining companies reported suffering from electrical supply disruptions from Kazakhstan Electricity Grid Operating Company, the national grid operator. Later in October, the 100 MW limit became law.

Miners started being categorized into two groups by the Kazakhstan government after these changes: “white” and “gray.” Companies that respected power limitations for new farms, endured electricity curtailments and were properly licensed and registered fell into the “white” group. Miners that tapped into the power grid without proper approval were “gray.” Kazakhstan’s Energy Ministry said “white” miners wouldn’t be disconnected from the national grid, but anyone unlawfully mining could be.

The distinctions between “white” and “gray” mining meant nothing in late January, however, as the country’s energy problems worsened — CoinDesk reported that all miners in the country were to have their power completely shut off from January 24 through the end of the month. Later in February, Kazakh authorities shut down 13 mining operations (presumably in the “gray” category of miners) and promised more crackdowns on illegal mining.

Even though Kazakhstan’s mining industry isn’t suffering a blanket ban like the one that China imposed, life has become exponentially more difficult for Kazakh miners over the past several months. And things could continue worsening with unlicensed miners being targeted by authorities, with some Kazakh policy makers considering a 500% tax increase for registered miners.

How Are Kazakh Miners Being Impacted?

Some big names in the Bitcoin mining industry have a presence in Kazakhstan. Even though they won’t all be forced to move every machine out of Kazakhstan, each of them surely feels the strain of Kazakhstan’s policy changes.

BIT Mining, a publicly-traded company that recently pivoted to Bitcoin mining, planned to invest over $9 million in a Kazakhstan-based mining facility with up to 20 MW of power. BIT Mining started moving ASIC mining machines to Kazakhstan from China’s Sichuan region in June 2021 following China’s mining ban. The company planned to move roughly 3,000 machines from China to Kazakhstan. As of mid-February, however, the company completely scrapped its construction plans in Kazakhstan, instead focusing on expanding operations in the U.S.

Canaan, a publicly traded ASIC manufacturer, also made big plans in 2021 to build mining operations in Kazakhstan. The company started mining in the Central Asian country in June 2021. By December, the company had delivered over 10,000 machines to the region and said it planned to deploy roughly 850 petahashes of mining capacity in the near future. Canaan hasn’t yet provided an update on its machine deployments given the region’s changing regulations.

Chinese gaming company The9 got into mining in early 2021, with an agreement to buy over 26,000 machines that would be deployed in China’s Xinjiang, Sichuan and Gansu regions. After China shut off its access to power, The9 announced in August its plans to build a 100 MW facility in Kazakhstan through a joint venture with KazDigital. The9’s next earnings report is expected in March, and just how much Kazakhstan’s strict energy restrictions have complicated its expansion plans is not yet known.

A private mining company, BitFuFu, also shipped an estimated 80,000 ASIC machines to Kazakhstan and suffered bigly from the country’s abrupt energy policy changes. In the fourth quarter of 2021, the company simply abandoned its machines in the region after struggling with Kazakhstan’s power rationing, opting instead to buy new hardware from Bitmain, ship it to the U.S. and resume mining.

Mining transplants from China to Kazakhstan aren’t the only ones struggling with new regulations. And they certainly aren’t the only ones who bet big on expanding operations in the Central Asian country.

Genesis Digital Assets is a leader in the mining industry with facilities operating all around the world since 2013. In July 2020, Genesis CEO Marco Streng published a nearly-800 word blog post on LinkedIn explaining the company’s strategy for “doubling down” on investing in Kazakh mining capacity. Unlike other governments with anti-Bitcoin and anti-innovation mindsets, Streng wrote, Kazakhstan’s government understands “the importance of having an open mind to new ideas.” Streng also noted that the Kazakhstan government expected to attract $740 million in cryptocurrency-related investment over the next three years.

“Our plans alone far exceed this amount,” he wrote.

Of course, these plans were made prior to Kazakhstan’s energy rationing and mining restrictions. Exactly how significantly Kazakhstan’s policy changes have affected Genesis’ growth plans isn’t known. But in November 2021, the company announced plans to build a massive 300 MW mining facility in West Texas.

Enegix is another large-scale mining company operating multiple data centers across Kazakhstan. The company’s third mining facility, designed to power over 50,000 ASIC machines, started running Bitmain hardware in June 2021. As it battles with Kazakhstan’s severe energy rationing, Enegix is planning to achieve energy self-sufficiency by building its own hydroelectric power plants.

Operating in Kazakhstan since 2018, Xive is another native mining company affected by the region’s policy changes — and its team saw this coming. Xive’s founder Didar Bekbau warned about “harsh electricity limits” as early as September 2021 and continued to tweet prolifically about every major development in the government’s fast-moving process of new regulations around mining and energy use. A few months later, in November, Bekbau posted a video on Twitter of his team completely shutting down its mining facility in South Kazakhstan. Xive still runs “mini farms” in other parts of the country though, Bekbau tweeted in December. But his team is actively exploring other areas for new farms, including the U.S.

Were Kazakh Changes Avoidable Or Predictable?

Every country, county and city around the world presents a unique set of regulatory and political risks that Bitcoin miners are forced to weigh. The variable tradeoffs are endless. And Kazakhstan is no exception. Cheap energy, low taxes and a generally friendly government made Kazakhstan a great home to Bitcoin mining for years. But the recent developments that miners are now struggling with aren’t the result of poor strategy or severe miscalculations by miners. Following China’s mining ban, only clairvoyant miners would have known that Kazakhstan was a “bad” option for relocation.

As some miners leave Kazakhstan for the U.S., the comparative advantages of operating in America are clear. The U.S. offers a more stable legal regime, more robust capital markets and a generally more predictable regulatory environment. But the politics, business norms and other dynamics of operating in the U.S. aren’t equally favorable to every miner, especially for some miners who prioritized quickly bringing their machines back online after being evicted from what was previously the world’s largest mining hub.

In short, political favor toward Bitcoin miners can change anywhere at any time. Every jurisdiction carries risk. Xive’s founder understood this when he tweeted a video of his team shutting down one of its Kazakhstan-based farms saying, “Country risk played out.” The best any miner can do is understand the risk they accept and work to mitigate it as much as possible.

The Next Phase Of Kazakh Bitcoin Mining

What Kazakhstan’s mining industry will become in the next year is an open question. A horde of mining companies descended on Kazakhstan with plans for massive mining operations. And now that the government has placed substantial limits on the sizes of new farms and is considering heavier taxes on mining, the country’s once-promising mining boon looks less auspicious.

Some miners are still optimistic though. Bekbau tweeted in January that Kazakhstan will be a long-term “mining harbour” despite recent adverse policy changes. And a double-digit percentage of Bitcoin’s hash rate is nonetheless significant.

But just because Bitcoin’s hash rate is once again setting record highs doesn’t mean every mining organization has also fully recovered. And after leaving China with plans for large-scale operations in Kazakhstan, many big mining companies are still in the process of adjusting to problematic Kazakh policy changes.

This is a guest post by Zack Voell. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Filed Under: Asia, Bit Mining, Bitcoin Magazine, bitcoin-mining, business, Canaan, China, English, Feature, genesis, Hash rate, Kazakhstan, Regulation

China Mining Ban Worsened Bitcoin’s Carbon Footprint, Study Claims

26/02/2022 by Idelto Editor

China Mining Ban Worsened Bitcoin’s Carbon Footprint, Study Claims

Contrary to some expectations, Beijing’s crackdown on the crypto mining industry has increased Bitcoin’s carbon emissions, researchers have alleged. Leaving China, miners also left behind its eco-friendly hydropower and are increasingly relying on energy generated by fossil fuels, they claim.

Bitcoin Mining Allegedly Less Green Since Miners’ Exodus From China

Cryptocurrency mining has become a dirtier process after the Chinese government effectively prohibited bitcoin extraction in the People’s Republic, according to research published in the Joule journal. The share of renewable energy used to power mining operations has fallen from almost 42% to around 25% last August, the study insists.

It has been estimated that Bitcoin produces more than 65 megatons of carbon dioxide annually. The amount exceeds the total carbon emissions of a country like Greece, for example, which in 2019 registered less than 57 megatons of CO2. One of the authors, Alex de Vries, told the BBC:

We see the network becoming less green than ever before.

Speaking to Bloomberg, he elaborated that the relocation of mining companies to other countries such as the United States and Kazakhstan has led to a reduction in the use of renewable energy sources. This made bitcoin production less friendly to the environment as it resulted in the increase of its carbon intensity by about 17%.

De Vries is the founder of Digiconomist.net, a platform presenting itself as “dedicated to exposing the unintended consequences of digital trends” and publishing the Bitcoin Electricity Consumption Index. He is a researcher at the School of Business and Economics at the Vrije Universiteit, Amsterdam, and also an employee of the Dutch central bank. His estimates about Bitcoin’s energy usage have been challenged by crypto media and members of the community but quoted by mainstream publications.

Migration to the U.S. has expanded the use of fossil fuels, especially natural gas, as a relatively small portion of the nation’s electrical energy is sourced from renewables, the latest report co-authored by De Vries claims. And moving to Kazakhstan often leads to utilizing electricity from power stations burning what’s known as “hard coal,” polluting more than the Chinese plants that miners worked with outside the wet season.

China banned crypto-related activities such as trading back in 2017 but the government did not interfere with mining until last spring. In May 2021, the State Council decided to clamp down on the industry following President Xi Jinping’s pledge to achieve carbon neutrality in the next four decades. The crackdown has since spread to provinces like Sichuan where miners had access to hydropower.

Industry groups had been more optimistic about the use of renewables in the minting of digital currencies, BBC noted in its article. It quotes an older estimate made by the Bitcoin Mining Council, according to which the “global mining industry’s sustainable electricity mix had grown to approximately 58.5%.”

Meanwhile, in Europe, nations such as Sweden and regulators like the European Securities and Markets Authority (ESMA) have more recently voiced concerns over the growing use of renewable energy for bitcoin mining. They have issued calls for an EU-wide ban on energy-intensive mining methods.

On Friday, news came out that the European Parliament canceled a scheduled vote on the bloc’s new crypto regulations after a proposal to prohibit proof-of-work mining found its way to the draft Markets in Crypto Assets (MiCA) framework and sparked negative reactions from the industry.

What are your thoughts on the findings of the bitcoin mining study? Let us know in the comments section below.

Filed Under: Bitcoin, Carbon, carbon footprint, China, crypto, crypto miners, crypto mining, Cryptocurrencies, cryptocurrency, Electricity, emissions, Energy, English, EU, Europe, fossil fuels, Kazakhstan, Migration, Miners, Mining, natural gas, News Bitcoin, power, relocation, Renewable, renewables, Research, study, Sweden, U.S.

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