What China lost seems to be a gain for its western neighbor: Kazakhstan.
During the Meeting of the State Council of China on 21 May, Deputy Prime Minister Liu He called for restrictions on the mining and trading of cryptocurrencies, citing social and economic risks.
His comments prompted some domestic cryptocurrency mining companies to withdraw their operations from China.
A week after the State Council’s announcement, the founder of Kazakhstan’s mining company Xive, Didar Bekbauov, wrote on Twitter: “The migration of Chinese miners is real. The hash rate distribution is bullish,” implying that part of China’s cryptocurrency mining power is being distributed to other countries, including Kazakhstan.
China’s hardening attitude towards digital currencies is pushing China-based mining companies to consider settling elsewhere, and nearby Kazakhstan is an attractive alternative.
For Chinese mining, Kazakhstan’s proximity makes it easier to move mining equipment, facilities, and businesses across the border. A large chunk of China’s Bitcoin mining – about 36% – takes place in the western province of Xinjiang, which is adjacent to Kazakhstan.
“Given the crackdown, Kazakhstan is a logical place for Chinese mining companies because they are right next door and energy prices are low,” says Valery Vavilov, co-founder, and chief executive of Amsterdam-based blockchain company Bitfury, which has a presence in Kazakhstan.
Low Energy Costs
Kazakhstan’s “hosts” charge competitive prices globally, given the country’s extensive energy infrastructure, and in particular the abundance of coal plants in operation. It has a national energy surplus of about 3,000 megawatts – the average Bitcoin farm in Kazakhstan consumes 48 megawatts of energy.
These factors translate into electricity prices for cryptocurrency mining that are at the same levels as prices in China, the US, and Russia.