Crypto miners who purchase solar panels for their mines will be eligible for a substantial tax break and cheaper electricity rates in Uzbekistan, according to a new report from Reuters.
The Central Asian country is legalizing crypto-mining powered by solar energy, and allowing miners who install their own solar panels to benefit from a new federal income tax exemption. The government is also levying steeper electricity rates on miners who choose not to make the switch to renewable energy, and imposing surcharges during the busiest hours of the day and requiring miners to pay twice the electricity price of those using solar energy.
In the past, a majority of crypto mining operations were headquartered in China before Beijing banned cryptocurrency and crypto-mining in 2021, citing its poor environmental record, among other reasons. The change led crypto-mining companies to resettle in geographic locations where renewable energy was scarcer and there were fewer checks on environmental harm. As the crypto-mining industry relocated to the U.S. and Central Asian countries like Kazakhstan and Uzbekistan, dirtier energy began to power Bitcoin mines that were previously hooked up to China's hydropower energy.
In fact, according to a recent peer-reviewed study in Joule, crypto-mining's carbon footprint increased by 17% after China's ban, undermining the conventional belief that the mining industry was becoming cleaner and greener.
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Today, the U.S. is the top country contributing to the global Bitcoin mining hash rate, followed by Kazakhstan. The latter had to rein in its crypto-mining industry, which largely relies on old coal plants, after it strained the power grid. Together, Kazakhstan’s crypto miners use up to 8% of the country’s total power generation capacity — or 1.2 gigawatts — for mining crypto, according to Reuters report.
However, it can be challenging — although not impossible — to get miners off fossil fuels, given that it may be cheaper or provide more reliable and plentiful electricity. In Kazakhstan alone, crypto-mining revenues will reach $1.5 billion during the next five years, according to one Coin Telegraph estimate, and government officials are increasingly worried about an overburdened electric grid.
In 2018, Uzbekistan passed legislation permitting crypto trading on domestic crypto exchanges. Earlier this week, the former Soviet republic passed a decree to create a new agency to put forward a "special crypto regulation regime" in the country.