Kazakhstan considers mining “technological progress”, goes by without taxing it
The governments all around the world are taking their stance regarding cryptocurrencies and their impact on economies. Some of them pose regulations, some of them put taxes, some of them even ban cryptocurrencies altogether. However, Kazakhstan has decided not to follow the lead.
According to a December 4 report published by a business publication Kursiv, the Kazakhstan government will consider cryptocurrency mining not as an entrepreneurial vocation but as rather a technological advancement. The news was announced at a local event dedicated to blockchain called “Blockchain Day” on December 4.
Madi Saken, a legislative analyst at the Data Center Industry & Blockchain Association of Kazakhstan (NABDC), revealed this information on the aforementioned conference and added that after the cryptocurrencies are exchanged for fiat money, the government will consider taxing it like any other financial activity.
In this government-crypto relationship, Kazakhstan is more or less an exception. Its government has voiced the need to regulate cryptocurrencies as such, however, when it comes to mining, they’re taking a rather different approach.
Blockchain taking away governments’ monopoly over money
The world governments are becoming more and more afraid of cryptocurrencies. And there might be reasons behind their suspicions. For instance, the main idea behind creating blockchain and its proxy Bitcoin is to alleviate the shortcomings that the governments introduce in the money industry – including politically-induced inflation, monitoring of transactions, and overall monopoly over the money supply.
Cryptocurrencies delegated all that power to ordinary people – their actual users. The money supply is controlled by the supply-demand forces of the market, i.e. consumers, therefore, the unexpected inflation isn’t a problem anymore. The crypto transactions are also anonymous – every detail about it is encrypted and only the financial partners can see some of it, not anyone else, including governments.
Besides, digital money goes beyond any geographical or political border and asks no one for permission. You can be in New Zealand and pay the electricity bill for your apartment in Canada, for all intents and purposes. This scares the governments and makes them take preventive steps.
Regulatory measures in other countries
For example, in developed countries such as the United Kingdom, Switzerland, Denmark, etc. the digital currencies are being taxed with different clauses – be it corporate, capital gains, income, or foreign currency taxes.
In the more restricted states such as China, the regulations are much more pressing. The Chinese government has started off by banning the Initial Coin Offerings (ICOs) and crypto exchanges altogether. After that, it is the world’s biggest crypto markets, China went on to restrict access to mining and onshore/offshore internet crypto-sources. This way, the government can be a sole miner and provider of the digital currency in the country.
Kazakhstan takes a different approach towards cryptos
So, this is the overall legislative environment of the world where Kazakhstan’s government has decided that its development can greatly benefit from cryptocurrencies. The mining process, as the report states, will be considered a “purely technological progress” which can boost the effectiveness of the market.
The proposed law, on which the legislators are already working, is going to establish a particular legal status of cryptocurrencies and their mining. As Saken mentions, the current tax law in Kazakhstan only covers the income in the form of fiat money. Salaries, revenues, profit – if they’re transacted in tenge, US dollar, or any other currency, they will be taxed.
However, if and as long as they are transferred in Bitcoin or another cryptocurrency, they won’t be subject to any taxation because they, along with crypto mining, are considered impetus to technological advancement. Digital currencies will be taxed after they are exchanged for “real money”, that is, the government-issued currencies.
With that being said, there’s one particular area where cryptocurrencies are still being taxed even if they aren’t exchanged for fiat money. The crypto mining farms that provide services for private entities to use their mining hardware will be subject to taxes as they’re treated as data centres.
The law regarding cryptocurrencies and their legal status is currently being reviewed by the presidential administration. After that, the bill will probably be sent to the lower house of the parliament, Mazhilis, this month.
As mentioned earlier, Kazakhstan’s government has taken a rather positive position with regards to cryptocurrencies and blockchain in general. In 2018, for example, the governor of the Astana International Financial Center (AIFC) stressed that despite the need to regulate cryptocurrencies, they’ll still be supported as blockchain poses great opportunities for technological development of the country.
Regional stance towards blockchain
As it turns out, the region of Central Asia has a more or less positive outlook towards cryptocurrencies – with some exceptions. The last year, for example, Uzbekistan became a crypto-friendly country be legalizing crypto trading and making it tax-free. In Tajikistan and Turkmenistan, the legislation isn’t exactly explicit on cryptocurrencies and blockchain, however, they are present in those countries and the exchange is possible in the US dollars.
However, Kyrgyzstan has taken a strict stance towards cryptocurrencies by outright banning them back in 2014. The government only allows its own currency, Kyrgyzstan som to be the sole legal tender on its territory, prohibiting any other “virtual currencies”.
