The Kyrgyz Republic, a Central Asian state bordering China, is reportedly expanding its cryptocurrency mining capabilities. All of this with the support of the local government. This move comes as part of a broader strategy to optimize energy use and stimulate economic growth.
Government-Backed Crypto Mining Farm
Kyrgyz President Sadyr Japarov has approved the construction of a cryptocurrency mining farm at a hydroelectric power plant. According to a report by Kyrgyzstan’s national news agency, Kabar, on July 27. The government plans to invest up to $20 million in building this facility at the Kambar-Ata-2 Hydro Power Plant.
The president believes that a crypto mining farm will help the government avoid energy losses. Since the launch of Kambar-Ata-2 in 2010, Kyrgyzstan has reportedly lost 6.8 billion kilowatt-hours (kWh) of energy due to this issue. The Kyrgyz government aims to deploy the remaining energy wisely and generate revenue for the country’s budget.
Energy Crisis and Cryptocurrency Mining
Interestingly, this report comes just days after President Japarov announced a state of emergency in Kyrgyzstan’s energy sector, set to begin on August 1, 2023, and expected to end on December 31, 2026. The emergency situation is reportedly due to climate challenges, a low inflow of water into the Naryn River basin, and a lack of generating capacity due to excessive energy consumption.
Despite these challenges, the president emphasized that crypto mining would be tariffed at the highest rate available in Kyrgyzstan, around 5 Kyrgyzstani soms ($0.057) per kW.
Cryptocurrency mining as an Economic Opportunity
Kyrgyz authorities have been increasingly viewing cryptocurrency as an opportunity to boost the local economy. In March 2022, Kyrgyz lawmaker Karim Khanjeza urged the authorities to legalize the cryptocurrency industry during a parliamentary committee meeting. He argued that “nothing is growing as fast as cryptocurrency” and called for a legal framework for crypto.
Despite introducing some regulations for crypto exchanges in 2021, the government of Kyrgyzstan has not passed any crypto-related laws so far. A few years ago, a former government official argued that cryptocurrency mining was a significant factor driving the energy crisis in Kyrgyzstan.
Conclusion
The Kyrgyz Republic’s move to establish a government-backed crypto mining farm is huge. It signifies a shift in how countries perceive and utilize cryptocurrencies. Kyrgyzstan is not only addressing its energy loss issue but also creating a new revenue stream for its economy. By leveraging the unused power from hydroelectric plants for crypto mining. This innovative approach could serve as a model for other countries grappling with similar energy and economic challenges.
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