One of the weirdest fallouts from the Ruzzian invasion of Ukraine this year has been the re-invigoration of crypto assets for a place for fleeing Russians escaping the draft or oligarchs wanting to move their stolen money offshore to escape EU and other international sanctions.
This has seen Kazakhstan again come to the forefront as on the stalwarts of Bitcoin.
From Nikkei Asia:
Kazakhstan’s bitcoin boom flared out in the spring of 2022, after the government abruptly cut miners off from the national grid. The industry had grown from a handful of prospectors in 2017 attracted by cheap electricity to the world’s second-largest by mid-2021. A ban on crypto mining in China last June drove many miners to move their equipment to Kazakhstan. Local estimates put the total power usage of bitcoin mining at more than 1.5 gigawatts by late 2021, two-thirds of which was from illegal, “gray” miners.
Bitcoin mining is incredibly energy intensive. Globally, the industry consumes more electricity in a year than Argentina. In Kazakhstan, the surge pushed the energy grid to beyond capacity, leading to localized blackouts. The power shortages, and the corruption that enabled them, added to a long list of grievances, which exploded in massive protests in January. More than 200 people were killed in a violent crackdown on demonstrators.
In the aftermath, the authorities effectively shut down the crypto mining industry. More than 100 gray mines, including those operated by relatives of senior politicians, were forced to close, and registered “white” miners had their access to the grid dramatically curtailed. International miners left for friendlier jurisdictions, some back to China, others to Russia or the U.S., leaving behind stranded assets like the mines in Ekibastuz.
But within months of shutting down the bitcoin mines, the Kazakh government set out to convince another group of rootless crypto players to settle in the country. The government has announced a series of initiatives to attract crypto exchanges, investors and startups to Astana, believing that crypto could be the key to kick-starting its finance and tech sectors. Government officials say they see crypto as a way to leapfrog other financial centers, which have wavered over how to regulate the industry.
The plan is ambitious, involving training for thousands of developers, a regulatory free zone, and “full legal recognition” for crypto — hinting that the government might allow currencies not only to be traded, but spent in the country. But, with the crypto markets in turmoil following the implosion of the industry’s third-largest exchange, FTX, the plan is also a risky one that could expose the country’s banks and consumers to the industry’s notorious volatility.
Risky indeed. Authorities around the world have either outright banned trading in crypto or taken it out of the hands of retail investors, with major exchanges like Binance and others faltering or outright shutting down.
Kazakhstan may be using the veneer of trying to create a digital version of its sovereign currency, but this all smacks of just adding another layer of money laundering opportunities.