Experts from the countries in the region discussed the present and future of crypto mining and crypto currency in Central Asia at the international expert meeting organised by CABAR.asia analytical platform.
According to speakers, both crypto currency and crypto mining have a future in Central Asian countries, yet a range of critical issues need to be solved. They refer to the issue of power shortage in the region, access to broadband internet, creation of the necessary legal framework, as well as raising awareness of the people, specially the younger generation, on crypto currency and crypto mining technologies.
Experts of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, as well as the researcher for CA from France took part in the intenrational online meeting of experts named “Is there any future for crypto currency in Central Asia?” Abakhon Sultonazarov, regional director of IWPR for CA, delivered a welcome speech; researcher of Central Asia Institute for Strategic Studies, Svetlana Dzardanova, was the moderator.
France-based expert Michael Lambert, representative of INSEAD (Ireland), alumnus of Sorbonne University, in his speech said there were more questions than answers about crypto technologies in the region. Moreover, there are many questions about the crypto technology itself.
According to him, there are active discussions held in the world about whether crypto currency can replace the dollar or another international currency as the universal means for making payments. The question is still open. Theoretically, crypto technology is deemed as the safest for making international payments, but in practice it hasn’t proved to be the same.
“Crypto currency is not a perfect solution to international transfer and transfer in all Central Asian region. And it is proven to be very energy consuming. Crypto is also far from secure – they are in theory, but some application that are using them proven to be not so secure and not so private. The blockchain technology is the future of money, the real question about it – whether it will be state owned or not, will be it centralized or decentralized,” Lambert said.
There are various attitudes to this technology in the world: some countries, for example, El Salvador, use crypto currency widely and try it out, and other large-scale economies, like China, Turkey, suppress strictly and persecutory crypto technology.
“When discussing crypto currency in terms of Central Asia, we should keep in mind that all countries in the region are different and their geographic locations are relevant in terms of how much the crypto currency would be adapted and used,” Lambert said.
Electric power is actively mentioned when speaking about crypto currency because its mining needs stable and bulk electric power, as well as the internet. However, both are having problems in Central Asia, Lambert said. In the region, electric power is not enough even to meet consumer needs, not to mention crypto mining. This is a relevant issue not only for Central Asian countries, but also for Belgium, France.
Lambert also reminded that given the peculiarities of transactions, crypto currency might be used for money laundering. Also, the question of tax calculation for crypto currency transactions arises. All these questions need to be additionally elaborated, analysed and discussed, France-based expert Michael Lambert said in his opening speech.
Then, Kanat Nogoibaev, researcher and alumnus of CABAR.asia School of Analytics, delivered his speech. He told about the situation with crypto currency in Kyrgyzstan and represented his solution of crypto currency mining amid the shortage of power in the republic.
According to him, after China had banned activities of miners, some of them transferred their businesses to Central Asia as it has cheap power. But the problem is that they operate illegally in the region and the authorities recognise this problem and state that they would be banning their operations.
“But as we can see from practice in our region, if something is banned, it does not necessarily mean that operations cannot be continued illegally,” Nogoibaev said.
He noted that although the Kyrgyz government is thinking about how to legalise crypto mining, the State Committee for National Security (GKNB) continues to detect crypto mining farms, arrest their owners, workers, and hinder their operations in every possible way.
According to him, the approach to work with the representatives of the industry needs to be changed and options of mutually beneficial cooperation should be sought.
These could be the solutions:
- It is necessary to establish the dialogue between the government and business in this regard. The question of reducing customs dues on the imports of special equipment for investors in this sphere should be discussed;
- The capacity of small hydro power plants, especially in the Kyrgyz Republic and Tajikistan, should be built. They can be built together with investors. The minimum cost of such HPPs is about 4,000 dollars. Part of the energy could be used by the farm itself, and another part could be used by nearest communities. Canada and Argentina have this practice. Alternative kinds of electric power can be developed, as well: solar panels, wind, atomic;
- However, CA countries do not have clear legislative regulation of crypto currency yet. The experience of the United States, other countries can be used, without the need to reinvent the wheel;
- The authorities need to change the approach – they should not take crypto technologies with animosity, they should not head for prohibition and restriction, but look for options of mutually beneficial cooperation and deriving profit for both the state and the business.
Sanzhar Amangeldy, partner of Unicase Legal Firm, told about the situation in Kazakhstan. According to him, their laws legalise the crypto currency mining in their country, but its sale is not allowed. However, foreign investors located in the territory of ‘Astana’ International Financial Centre are allowed to mine and sell it.
He added that no special licence is required for crypto currency mining because crypto currency mining is not prohibited in Kazakhstan. However, according to the law “On informational support” of Kazakhstan, transactions in crypto currency are prohibited in the country. Therefore, foreign companies use local companies for hashrate.
According to Amangeldy, the laws of the Republic of Kazakhstan allow legal mining of crypto currency. All one needs to do is to get a land plot and prepare all necessary infrastructure and get the permit from state authorities, as well as enter into agreement with the electric distribution company on power supply to the mining farm at a relevant rate. Illegal operations are investigated and punishable under the law of the Criminal Code of Kazakhstan on illegal entrepreneurial activity.
“I’d like to emphasize that crypto currency has a future in Kazakhstan and Central Asia. Renewable power sources might be used for it, but the region has no conditions for it so far,” Amangeldy said.
Temur Pallaev of Tajikistan, senior engineer of A1 Loiha company, discussed in detail the benefits and disadvantages of crypto currency, as well as the situation in this sphere in Tajikistan.
According to him, the fact that crypto currency transactions are executed faster than traditional banking transactions and are much safer due to complex algorithms used can be considered as benefits (although, at the beginning Michael Lambert noted that crypto currency transactions are not as safe – Editor’s note). This technology is being used actively in Nigeria, Vietnam, Philippines, it is popular in Turkey, India and other countries.
Speaking about disadvantages, the mining of crypto currency requires powerful electricity and high-speed internet. Also, crypto currency can be stolen if the owner fails to protect their digital assets securely. The risks are that crypto currency is volatile, is not backed with gold or other resources unlike traditional currency. Another disadvantage is that it is widely used in some countries, yet cannot be used to pay in cafes, hotels and other frequently visited places in the world, generally.
“Crypto currency is now undergoing through a very interesting stage – on the one hand, it is no more prohibited in the world, but on the other hand, it is not yet fully accepted or used in the world,” Pallaev said.
Speaking about the situation in Tajikistan, Pallaev said that after China prohibited crypto currency mining, several major mining farms emerged in the country, but they face power shortage and low power electricity supply.
Tajikistan has some other issues with the internet – it is slow because it is controlled and governed by the state. Internet connection in Tajikistan is provided via the single switching centre, which is the reason for slow and sometimes unstable internet.
“Of course, crypto currency has a future in Central Asia, but the problem of unstable power and internet need to be solved,” Temur Pallaev said.
Lyubov Tigai, partner of Unicase Legal Firm in Tashkent, said about the situation in this sphere in Uzbekistan. According to her, Uzbekistan is intending to attract investments, especially into the power-generating sector, construction sphere, other sectors that would promote the welfare of the people and the country, in general.
However, there are some legal acts regarding crypto currency mining, which were adopted in recent years, including the special presidential decree on organization of crypto currency exchange in 2018, and the electric energy situation in general affects the regulation of crypto currency in the country.
Foreigners have more opportunities in this regard – they have a right to buy and sell crypto currency via local special exchange offices. Citizens of Uzbekistan have a right to sell it, but not to buy it.
The state controls this sphere strictly and anonymous transactions are prohibited and controlled by state bodies. In general, it may not be necessary because selling of crypto currency is tax-free in Uzbekistan.
According to Tigai, currently Uzbekistan drafts the project of installation of solar and thermal power plants, whose advantages could be beneficial for the crypto currency mining business. Now, land plots for mining farms are allocated without the electronic auction as a motivation.
In general, participants of the expert meeting noted that crypto currency, crypto currency mining is a new yet promising sphere for all Central Asian states. It is obvious that more discussions need to be held and public awareness campaigns must be carried out to bring the level of discussion to the new qualitative level.
A series of international expert meetings of CABAR.asia were held under the IWPR’s ‘Amplify, Verify, Engage: Information for Democratization and Good Governance in Eusaria’ project, funded by the Norwegian Ministry of Foreign Affairs.
See full version of the discussion in the video below (in English):