Kyrgyz Republic’s lawmakers are looking into a bill tagged On Amending the Tax Code of the Kyrgyz Republic towards the taxation and regulation of cryptocurrency mining operations.
The government wants to secure more revenue through the bill by establishing taxation obligations for miners, as well as coming up with clear definitions for the terms ‘virtual assets’ and ‘mining’ within the context of cryptocurrencies.
If the lawmakers pass the bill, it will mark the first remarkable step by the country towards liberalizing cryptocurrency and ushering in a new taxation regime. In July 2014, the Kyrgyz Republic explicitly prohibited cryptocurrency assets as a means of payment.
According to the proposed law, miners will pay tax at a flat rate of 15% of profits generated through the sale of mined cryptocurrency assets. In August 2019, the Ministry of Economy of Kyrgyzstan first proposed the law with the aim of introducing cryptocurrency mining taxation. Based on the estimations of the ministry, an additional $4.2 million could be captured toward the country’s roughly $1 billion yearly budget.
The lawmakers likewise talked about introducing a designated electricity rate for miners, based on the Supreme Council’s suggestion of $0.05 per kilowatt-hour (KW/h) in December 2019. The suggested rate is a 70 percent premium relative to the country’s average price of about $0.030 per KW/h.
Nevertheless, some lawmakers expressed their concerns regarding mining operations while deliberations were ongoing on June 3. According to Deputy Aaly Karashev, the country has limited electricity generation capabilities; hence, large-scale cryptocurrency mining operations may affect electricity supply. At the moment, Kyrgyzstan is importing about twice as much power as it exports.
Deputy Natalia Nikitenko expressed worries regarding energy consumption and highlighted persistent illegal mining activities despite the temporary suspension of the activity in September last year.
The government cut off electricity supply to 45 mining companies last September because they were consuming 136 megawatts.