Crypto mining can be a resource-intensive process, which requires a lot of energy and specialized equipment. Energy costs can affect profitability significantly. When China banned crypto mining in 2021, miners migrated to destinations with low energy costs, such as Kazakhstan.
How crypto mining came and went in Kazakhstan
By the summer of that year, the Asian country boasted the second-highest hash rate in the world. The honor was short-lived. Kazakhstan’s miners exerted excessive pressure on the national power grid. What’s more, not all mining operations were legal. By the end of 2021, the mining industry was consuming almost 10% of the country’s generating capacity.
Before the mining surge, the country was producing a surplus of energy, but crypto mining turned it into a deficit. Power outages and shortages became a fact of life across the country, exacerbating existing tensions over rising fuel costs, nepotism, and corruption. The tension spilled over into mass protests in January 2022. The government cut the miners off the grid a few weeks after that.
Three other countries banned crypto mining to protect their national grids as Bitcoin halving approaches.
Paraguay puts temporary ban on crypto mining
Paraguay legislators introduced a bill to halt crypto mining in the country temporarily. They are concerned that illegal crypto mines are interrupting the supply of power by stealing it. The bill, introduced on April 4, 2024, would ban crypto mining farms as well as holding and trading cryptocurrencies.
The broad scope of the bill tries to regulate crypto staking and wallets as well. Its proposed term is six months and it aims to be a temporary solution pending enactment of a full law. In addition, the country’s national power grid operator needs time to be able to guarantee sufficient power supply to crypto mining operators without impacting other grid users.
The country has the third-biggest hydroelectric dam in the world
The draft of the law notes the significant crypto-mining boom in Paraguay. Crypto mining operators have flocked to the country’s Alto Paraná region, located in the southeast bordering Argentina and Brazil. The region is home to the Itaipu hydroelectric dam, the third-biggest one in the world.
Since February 2024, there have been 50 cases of interrupted power supply in that region, all of which are due to crypto mining operators secretly and illicitly joining the grid. It is estimated that each crypto mining farm causes losses of approx. $100,000. The annual losses in the Alto Paraná region alone could reach $60 million.
Kuwait first banned crypto payments, then crypto mining
In July 2023, Kuwait’s financial regulator banned Bitcoin mining and reiterated previous bans on crypto-related activities. In the past, the authorities had only discouraged crypto payments. Back in 2017, the local regulator warned financial institutions that crypto wasn’t legal tender. Kuwait moved to impose restrictions on financial institutions and payment services using crypto.
Before the ban on crypto mining, its regulatory status had been ambiguous. It is difficult to calculate the actual costs of crypto mining because large-scale operations often have special deals for lower rates or are integrated with their own power sources, which can bring down costs.
Before the ban, Kuwait was considered the most affordable crypto mining location in the world. One estimate suggested the cost of mining in the country was just $1,400 per Bitcoin in 2022. In comparison, it cost over $18,000 to mine Bitcoin in Texas that year. One Bitcoin was trading for more than $40,000 back then.
Nepal cited significant crypto-related risks
Nepal banned crypto mining, use, and trading in September 2021. Nepal’s central bank, Rastra Bank, declared these activities illegal. No reason for the decision was given then, but in 2023, the bank identified 13 significant crypto-related risks in a report. These included a risk to the country’s foreign exchange reserves and crypto being used to fund terrorism and facilitating money laundering. The report also highlighted that crypto users were not sufficiently protected.
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