Kazakhstan’s Crypto Aspirations Face a Power Problem
Kazakhstan’s First Deputy Minister of Digital Development, Innovation, and Aerospace Industry, Kanysh Tuleushin, believes that state-regulated cryptocurrency mining could generate substantial revenue and help modernize the country's energy infrastructure. Tuleushin argues that Kazakhstan has the potential to become Central Asia’s leading blockchain hub. However, this vision clashes with the country’s ongoing energy crisis, which continues to impact households and businesses. Optimistic Vision In an article published in the state newspaper Kazakhstanskaya Pravda, Tuleushin outlined how mining operations could contribute to the development of Kazakhstan’s power generation capabilities. He emphasized the use of associated petroleum gas (APG) to produce electricity for mining, which he claims would reduce carbon emissions and boost oil sector profits. “Miners can help modernize the power grid. In the U.S., they participate in grid balancing by consuming excess energy during low-demand periods. Kazakhstan already has a ‘70⁄30’ initiative, where foreign investors upgrade thermal power plants, allocating 70% of new capacity to the general grid and 30% to miners,” Tuleushin wrote. Tuleushin reported that cryptocurrency mining has brought 17.7 billion tenge to the national budget over the past three years. Meanwhile, trading volume on the Astana International Financial Center (AIFC) exchanges increased from $324.2 million in 2023 to $1.4 billion in 2024. From January 1, 2025, miners will be required to sell 75% of their assets through the AIFC. Despite a generally cautious regulatory stance, Kazakhstan permits digital asset trading within the AIFC. Digital assets are categorized as secured (linked to physical assets) or unsecured (such as Bitcoin and Ethereum). In 2023, digital asset transactions in Kazakhstan reached $4.1 billion, but 91.5% occurred in the “gray zone,” beyond state oversight. In 2024 alone, the Financial Monitoring Agency shut down 36 illegal crypto exchanges, froze $4.8 million in assets, and blocked over 3,500 illicit platforms. Tuleushin argues that fully legalizing and regulating these operations could add more than 190 billion tenge annually to the budget, enough to fund major public infrastructure such as schools and hospitals. He proposes extending crypto trading beyond the AIFC, authorizing crypto ATMs, and opening the market to major players, an approach akin to that of the UAE. Tuleushin also claimed that regions like Pavlodar and Karaganda have electricity surpluses and that Kazakhstan's cold climate further lowers operational costs for miners. Unchecked Consumption and Mounting Strain Despite the deputy minister's optimism, Kazakhstan’s Supreme Audit Chamber (SAC) has raised alarms over uncontrolled energy consumption by miners. According to a 2024 audit, miners consumed 901 million kWh worth 13 billion tenge, despite a national energy shortage, by bypassing RFZ LLP, the country’s sole energy purchaser. Former Prime Minister and current head of the Supreme Audit Chamber, Alikhan Smailov, warned, “Miners are consuming up to a billion kilowatt-hours. This is damaging our economy. How can we allow unchecked consumption amid such a crisis?” The audit revealed systemic issues, including deteriorating Soviet-era power plants (55% average wear), a 4,500-worker shortfall in the energy sector, and a lack of financial oversight by the Ministry of Energy. Looming Crisis In January...
