Uzbekistan wants digital miners to use solar power

Uzbekistan has changed its requirements to digital mining. Now only companies that have direct access to renewable sources are eligible for digital mining. However, even with these new rules, crypto businesses continue to stay in the shadow.

Power of the Sun

Uzbekistan consumes more energy than it can produce: in 2020, the country produced 66.4 billion kilowatts/hour of electricity while consuming 69.1 billion kilowatts/hour. In order to compensate for that shortage, Uzbekistan was forced to spend more and more money to resupply the energy from neighboring countries. In 2020, the country spent on that purpose $115.7 million. The government wants to cover the energy supply shortages on its own. The solution is renewable sources of energy.

Because digital miners consume a lot of energy, the Uzbek authorities want miners to use renewable sources only. According to the new rules digital miners are obliged to operate during daylight when solar power is available. Digital miners are allowed to use the public power grid at night but the price for them will be twofold higher than for regular consumers. Moreover, during peak hours the government may charge miners to pay an additional fee. If a crypto company connects to the power grid illegally, it will be obliged to pay a fivefold fee.

The new rule also prohibits the mining of anonymous cryptocurrency. This move followed the example of some other countries such as South Korea where the government has banned trading with anonymous cryptocurrency to avoid money laundering.

However, the new rule is not only about limitations: Uzbekistan is going to offer newcomers and investors some preferences. For example, companies can get subsidies from the government (up to $454,070) for acquiring renewable energy equipment.

A catch

However, there is a catch in the new rule. Any activity that can be considered digital mining must be registered by the regulator – the National Agency for Perspective Projects. At the same time, there is no legal base for that so far. «Once all the legislation is adopted, we will be able to start registering crypto miners. Meantime, we would recommend avoiding any attempts to conduct mining illegally without proper license or permission,» said the agency. In other words, so far there are no legal digital miners in Uzbekistan.

That being said, local law enforcement officials continue to force mining farms to stop working. At the end of March, the Uzbek police reported a foreign company in the Sirdaryo region that had been involved in cryptocurrency mining since August 2020. During that period this company earned about $7.7 million of revenue. On May 20, 2022, TV channel Uzbekistan 24 reported two similar cases in Gulistan.

There is no clear data about digital mining in Uzbekistan. According to Cambridge University, as of January 2022, the country accounted for a 0.05% share of the global volume of crypto mining (0.07% in October-November 2021). For comparison, the same rate in neighboring Kazakhstan in January 2022 was 13.22% (18.31% in October 2021).