Kyrgyzstan’s Burgeoning Bitcoin Mining Industry Powered by Hydropower

A recent visit by crypto expert Jaran Mellerud to Kyrgyzstan has shed light on the country’s thriving bitcoin mining industry. Kyrgyzstan’s vast hydropower resources, generating 90% of its electricity, create a favorable environment for bitcoin mining operations.

Mellerud’s findings reveal that the Kyrgyz bitcoin mining scene consists of both legal and underground miners. While legal miners follow regulations and pay taxes, underground miners take advantage of electricity subsidies meant for other industries. Many underground miners are either connected to or are powerful individuals in the government, which enables them to continue operating illegally.

The electricity tariff for crypto miners is $0.066/kWh, however, due to heavy government subsidies, it is only $0.033/kWh for other industrial consumers. This provides a strong financial incentive for miners to operate covertly. Kyrgyzstan faces a pressing need for new electricity generation capacity. Hydropower has the potential to generate up to 143 TWh annually, significantly more than the current capacity and nearly twice the annual electricity consumption of the Bitcoin network.

Legal miners in the country can contribute to hydropower development by partnering with hydropower plants, helping to finance these projects by purchasing electricity directly from the plants. Several smaller hydropower plants have already been financed by bitcoin miners in Kyrgyzstan, paving the way for more extensive projects.

With a large trade deficit and heavy reliance on gold mining for export income, Kyrgyzstan could benefit from diversifying its exports with digital gold through bitcoin mining. However, the political instability of the country remains a significant risk factor, highlighting the importance of approaching the growth of the bitcoin mining industry cautiously.