Uzbekistan Wants Bitcoin Miners to Invest in Solar Energy and Avoid Paying Income Tax
Cryptocurrency miners will now have to pay twice as much for electricity drawn from the national power grid under a new presidential regulation.
According to Reuters, citing a presidential directive released this week, Uzbekistan seeks to lure cryptocurrency miners away from coal by allowing the use of solar power in the strictly regulated local sector.
In the future, the country of Central Asia will likewise exclude cryptocurrency businesses, both local and international, from paying income tax.
Local miners would be forced to pay twice as much for power if the rule is enforced. During seasons of strong demand, they may potentially incur extra levies.
The new Uzbek National Agency for Perspective Projects requires crypto mining companies all around the nation to register, despite the absence of a legal licence. It was authorised in 2018 in Uzbekistan, but only one exchange has been authorised to operate – this is where local crypto miners sell the digital assets they produce.
CoinDesk reports that the new regulatory framework would compel crypto exchanges to conduct KYC checks on crypto dealers and store the information for five years.
In January 2020, the proposed law would have created a national mining pool, which would have provided member miners with cheap power. New solar incentives seem to have overridden such plans, with the goal of allowing for enough regulatory latitude to encourage the expansion of the local sector.
It is hoped that by encouraging the crypto sector to build and manage its own solar panels, the country’s ailing energy infrastructure can be alleviated.
As a result of the bitcoin mining that took place in Kazakhstan, Uzbekistan is still suffering.
Kazakhstan and neighbouring Kyrgyzstan experienced power shortages earlier this year as a result of a blanket ban imposed by Beijing on all bitcoin mining operations in China in June of last year.
In addition to Uzbekistan and Kyrgyzstan, Kazakstan’s corporate and residential sectors depend heavily on its electrical system. Government authorities later attributed extraordinary jumps in energy consumption to crypto miners, causing widespread power outages and disrupting heat and gas supplies.
Researchers at the Central Asia-Caucasus Institute & Silk Road Studies Program stated that although no fatalities were related to the outages, arrivals at Uzbekistan’s Tashkent International Airport were stopped, and hundreds were confined in railway carriages, and others were stuck in offline elevators and ski lifts. “The straw that broke the camel’s back” was how the researchers characterised crypto mining in a blog post.
Despite the region’s abundance of hydropower and carbon energy sources, the three nations were obliged to buy costly electricity through an antiquated Soviet energy system to remedy the difficulties.
As per the Cambridge Bitcoin Energy Usage Index, barely two months after China’s ban on Bitcoin mining, Kazakhstan was responsible for more than 18 percent of Bitcoin’s hash rate. Kazakstan became the second-largest bitcoin mining nation in the world, behind the United States in terms of production.
The amount of bitcoins mined in Uzbekistan is little in contrast. It is possible that the country’s share of the overall hash rate may rise given that crypto miners will not be subject to income tax for the foreseeable future.