Kyrgyzstan's Energy Dilemma and Cryptocurrency Mining

In an era of global energy transition and the digital economy boom, countries are exploring how to balance traditional energy security with the development of emerging digital industries. The recent controversy surrounding Kyrgyzstan's cryptocurrency mining policy serves as a microcosm of this global issue. The public clash between Energy Minister Taraibek Ibrahev and former President Almazbek Atambayev not only reveals internal policy differences but also reflects the complex challenges faced by resource-scarce economies in the digital economy era. This article will take a global perspective, objectively analyzing the events, the current state of the industry, and the underlying energy and economic logic based on publicly available information and data.

I. Policy Shift: A Game from Acquiescence to Complete Shutdown

In 2025, Kyrgyzstan's energy sector faces severe challenges. The country has long been constrained by aging power infrastructure, seasonal water shortages leading to fluctuating hydropower output, and rising electricity demand driven by economic growth. Against this backdrop, former President Atambayev publicly criticized cryptocurrency mining and electricity exports during periods of power shortage, calling it an "absurd act." This statement thrust the already controversial mining industry into the spotlight.

Energy Minister Ibrahim Ibrahim's response was more action-oriented. He told 24.kg news agency, "To put it mildly, Atambayev has always been fond of making empty promises and never taking responsibility. No one can compare to him in this regard." He then announced, "Given the current tight power supply situation, we have decided to completely shut down all mines nationwide. This matter is being personally overseen by me." This statement marks a shift in government policy from relatively lenient regulation to strong intervention. Although the minister did not disclose the specific number of mines or their power consumption, this move clearly signals a priority for ensuring electricity supply for residential use.

It is worth noting that the authorities previously emphasized that mines mainly rely on imported electricity rather than the main grid. Data shows that from January to August 2025, Kyrgyzstan's electricity imports from Russia increased slightly by 2.8% year-on-year, reaching 216.3 million kilowatt-hours. Of this, approximately 60.7% was supplied to state-owned "power plant" joint-stock companies (supply doubling), while the remainder was supplied to the mining company "Solarcoin" (supply decreasing by 49%). This "targeted import" model attempted to alleviate the conflict between mining and private electricity supply, but it clearly failed to eliminate policy pressure.

Meanwhile, Kyrgyzstan's electricity exports to Kazakhstan surged twofold in volume and ninefold in value (according to Kazakh customs data from January to August 2025). This seemingly contradictory phenomenon of "importing on one side and exporting on the other" may stem from price arbitrage in cross-border electricity trade, grid dispatching needs, or seasonal differences in power supply structure, reflecting the interconnectedness and complexity of the regional electricity market.

II. The Reality of the Mining Industry: Active Market and Ambiguous Identity

Despite policy uncertainty, Kyrgyzstan's mining market has shown resilience. According to registration information from the Financial Supervisory Authority, at least ten companies are active in this field (entering the market between 2021 and 2024), including Satellite 2005, Business-Drive, MBT Stroy, XJY Mining PTE, BaiLeader, Xiamen Jiasheng Engineering Machinery, Technology Company ‘FenYuan’, Spetsenergomontazh Kara-Balta, ViNET, and Solarcoin. These companies often have foreign investment and frequently re-register to adapt to the regulatory environment.

A notable characteristic is the ambiguity of their business registration. Most companies do not explicitly identify themselves as “mining companies,” but rather register under names such as “other information technology activities,” “web portal use,” “electrical equipment maintenance,” or even “metallurgical equipment manufacturing” (e.g., Xiamen Jiasheng Engineering Machinery). This identity evasion strategy is not unique in the global mining industry and is common in countries with underdeveloped regulatory frameworks, allowing companies to mitigate policy risks.

Even more noteworthy is the trend of supply chain consolidation: six of the ten mining companies are linked to power generation companies through their founders. This means that some operators act as both electricity producers and consumers, forming a "self-consumption" model. This vertical integration reduces operational risks caused by uncertainties in external power supply and is a common strategy for global mining companies to extend into the energy sector (such as North American mining farms investing in renewable energy power plants).

III. Electricity Consumption Controversy: The Misalignment Between Micro-Data and Macro-Impact

Energy consumption in cryptocurrency mining has always been a focus of global debate. In Kyrgyzstan, opponents emphasize the conflict between its high energy consumption and the backdrop of power shortages; supporters point out that its actual share is limited and its economic contribution is significant.

According to data from the National Tax Service, cryptocurrency mining consumed approximately 92.5 million kilowatt-hours of electricity in 2024, accounting for only 0.51% of the country's total electricity consumption (18.2 billion kilowatt-hours). In contrast, residential electricity consumption accounted for 75% of the total. This proportion is far lower than in major mining countries globally (such as Kazakhstan, where mining electricity consumption once reached 8%). Mining companies are required to pay a tax of 10% of the electricity value at a price of 5.58 soms per kilowatt-hour, effectively paying 6.138 soms per kilowatt-hour, which is 36% to 3 times higher than the average residential electricity price (1.5 to 4.5 soms). In 2024, the industry contributed approximately 567.7 million soms in total revenue (516.1 million soms in electricity bills + 51.6 million soms in taxes). From May 2025, the electricity price was raised to 6.06 soms per kilowatt-hour, further increasing unit revenue.

For energy companies, mining is one of the few areas that can generate premium revenue. In 2023, the government was forced to cover over 120 billion soms of debt owed to energy companies, and selling electricity at commercial prices became an important way to alleviate losses. Although Minister Ibrahev did not specify alternative revenue sources after the closure of mining operations, this decision inevitably involves a trade-off between social stability and fiscal revenue.

IV. Global Context: Kyrgyzstan's Dilemma and Lessons Learned

Kyrgyzstan's case is typical of energy-scarce economies addressing the challenges of the digital industry. A similar scenario played out in Kazakhstan: in 2021, the country briefly became the world's second-largest Bitcoin mining hub, but winter power shortages led the government to restrict mining, causing an outflow of computing power. Iran implemented seasonal bans due to increased power outages caused by mining. These countries collectively face a variant of the "resource curse"—the conflict between the digital industry's dependence on cheap energy and domestic energy security.

On the other hand, developed countries are attempting to integrate mining into sustainable energy systems through policy guidance. Texas in the US uses mining load to regulate grid fluctuations and absorb excess wind and solar power; Norway encourages mining farms to use hydropower, promoting the consumption of renewable energy. These cases show that mining and energy systems are not necessarily opposed; the key lies in how to achieve synergy through pricing mechanisms, grid connection requirements, and technical standards.

Kyrgyzstan's uniqueness lies in its small-scale power grid and its vulnerability to highly imported electricity. Although mining consumes a small percentage of electricity, its concentrated and stable load can put pressure on local power grids. Furthermore, the complexities of cross-border electricity trade (such as the coexistence of imports from Russia and exports to Kazakhstan) necessitate that policy-making consider regional energy geography factors.

V. Future Path: Regulatory Clarity and Energy Structure Optimization

Kyrgyzstan has addressed legal gaps through regulations governing virtual assets, but its energy infrastructure remains a weakness. Authorities are accelerating the construction of hydropower, wind farms, and solar power plants, and expanding imports to fill a power gap of approximately 1 billion kilowatt-hours. In the long term, the fate of the mining industry depends on the progress of energy infrastructure improvement and the clarity of the regulatory framework.

If the government allows mining farms to operate under specific conditions (such as using surplus hydropower and participating in demand response dispatch), it may be possible to replicate the "mining + grid balancing" model of Europe and the United States. Conversely, if shutdown policies are prolonged, it may force capital and technology outflows, missing out on the benefits of the digital economy. Global experience shows that blanket bans often foster gray markets, while transparent regulation and reasonable taxation better protect national interests.

Conclusion

The turbulent mining policy in Kyrgyzstan is essentially a difficult balancing act by a small nation in the face of globalization and the digital age, balancing energy sovereignty with economic interests. Minister Ibrahim's decision to shut down mining operations highlights a pragmatic consideration prioritizing people's livelihoods, while the understated presence of industry data underscores the resilience of market mechanisms. Former President Atambayev's criticism and the minister's counterattack reflect the disagreements among policymakers regarding complex issues. In a global context, Kyrgyzstan's predicament is not unique, and its ultimate choice will provide important lessons for similar economies: whether to reject it as a "burden" on the energy system or to transform it into a "tool" for grid optimization through innovative policies depends on the precise alignment of its national energy strategy with global trends. The future trajectory of the country's mining industry will depend on the progress of its energy infrastructure development, the degree of regional power integration, and the synergistic evolution of its virtual asset policies.