Recently, the cryptocurrency mining community has been shaken with rumors of Chinese miners leaving Iran — where crypto mining is authorized as an industrial activity — for Central Asia. The move has ostensibly been taken in an attempt to find a new safe haven amid the tensions between the United States and Iran, as well as rising oil and energy prices.
Iran’s attraction for crypto mining operations lies in subsidized electricity rates — as of July, 0.7 cents per kilowatt-hour (kWh), — which had purportedly even prompted miners from mining centers such as China to relocate their operations to the country. The welcoming environment for crypto mining farms also pertains to Iran’s effort to transform into a hub for digital currency and blockchain adoption in response to escalating economic sanctions imposed by the U.S. Following the legalization of crypto mining in the country, the Ministry of Industry, Mine and Trade began issuing licenses for the activity, which resulted in a surging demand. The activity is also set to be subject to taxation like in any other industry, and miners who create their own mining facilities will get support from the government.
However, despite the government’s friendly approach to the industry and favorable conditions, cryptocurrency miners have a number of causes for concern. Energy Minister Homayoon Ha’eri said that price is dependent on market factors such as fuel prices in the Persian Gulf. Last fall, the fuel price jump of upwards of 50% led to mass protests and demonstrations in about 100 towns of Iran, which prompted the government to temporarily restrict access to the mobile Internet in several provinces. The move purportedly forced many miners to cease their operations.
At the time, Mostafa Rajabi, a spokesman of Iran’s Energy Ministry, also said that the government was going to revise existing regulations and eventually disconnect crypto mining facilities from the national electric supply network during peak hours of consumption in Iran, which span about 300 hours a year. Moreover, Iran’s government announced plans to change electricity tariffs for miners, wherein miners would pay an average fixed sum of $0.08 per kWh at some times of the year, $0.04 per kWh during eight cold months of the year, and $0.16 per kWh in the remaining months when power consumption increases across the country.
And now, the Iran-U.S. military crisis has gripped the cryptocurrency community as on Jan. 3 a U.S. drone stroke on a convoy traveling near Baghdad International Airport, killing Iranian major general Qasem Soleimani of the Islamic Revolutionary Guard Corps. Although the crisis arguably inspired some new respect for Bitcoin — whose price skyrocketed from $7,000 to nearly $8,500 supposedly due to the tensions between the two countries — and other cryptocurrencies, it, however, provoked an outflow of crypto miners from Iran.
Chinese Bitcoin miners are now reportedly responsible for as much as 66% of the global BTC hash rate, which is likely to be a result of applying more advanced mining hardware. However, other leading crypto mining centers in the world include sites in the U.S, Russia and Kazakhstan. Central Asian countries like Uzbekistan and Kyrgyzstan attract crypto miners with extremely low electricity tariffs as well, which makes them direct competitors to neighboring Iran. Under such conditions, Chinese miners are reportedly shifting their focus to these countries, especially given that they have developed more clear regulations towards the industry in recent years.
On Jan. 13, Uzbekistan’s National Agency for Project Management made it a priority to create a national cryptocurrency mining pool in a bid to consolidate the capacities of domestic and foreign miners at the national level. As such, the agency intends to ensure the economic efficiency of crypto mining, boost the transparency and security of the industry, increase the efficiency of energy consumption in this area and increase the investment attractiveness of the country.
Still, the government of Uzbekistan ordered that cryptocurrency miners must pay three times more the existing electricity tariffs, which are now around $0.031 per kWh. Crypto trading remains legalized in the country, with participants enjoying tax breaks. However, foreign traders can only operate in the country if they create a local subsidiary in Uzbekistan. Alan Dorjiyev, the head of the the Blockchain & Data Center Industry Development Association in Kazakhstan, said that Uzbekistan’s approach to crypto mining is generally positive, although it is not the best place to operate a crypto mining facilities:
“Uzbekistan is overall positive towards mining. However the mining industry is centralised to one controlling body. It causes a lot of corruption when the government body decides to which miner they give electricity. Also this country has a deficit of power and high temperature during summer. Overall it is not the best place to do mining.”
Kazakhstan — where households pay $0.045 per kWh — is ostensibly developing legislation that will exempt crypto miners from tax obligations until the mined crypto is exchanged for fiat money. Specifically, the proposed law will establish the legal status of crypto mining as well as rules for its taxation. Dorjiyev commented on the matter:
“At this point in time, Kazakhstan government authorities have already created a very favorable climate for development of the industry. Their attitude is very friendly, industry is legal, banks are not closing accounts for mining companies. This industry has a multiplication economic effect on the economy as power stations are having new demand, grid is having more kWh to transmit, industrial companies are seeing increased demand for gas and coal.”
When asked about challenges crypto mining operators face in Kazakhstan, Dorjiyev stipulated that “the only challenge at the moment is building a low voltage infrastructure, so that miners can connect to the grid easier. At the moment miners are investing in electric infrastructure for lowering voltage from 110kv to 0,4kv.” As for Kyrgyzstan, with the lowest power tariffs of $0.024 per kWh among the three countries, the country’s government submitted a draft law on amending the country’s tax code to introduce cryptocurrency mining taxation. The Ministry of Economy of Kyrgyzstan seems to be exploring two possible options to implement taxes on cryptocurrency mining.
The first option would be the taxation of income, while the second would be taxing expenses incurred during cryptocurrency mining. Dorjiyev called Kyrgyzstan a very attractive place for crypto mining due to the electricity prices. At the same time, most of the energy power supplies in the country are generated by hydropower plants, which means that during the periods when the country suffers a deficit of water, crypto miners are limited in power supply. Worth noting, Kyrgyzstan cut off power to 45 crypto mining firms as they had consumed more energy than three local regions combined in late September 2019. “The position of the government towards mining is not clear. Also, Kyrgyzstan is a country where most of the mining equipment is contraband,” Dorjiyev said. Speaking about purported inflows of crypto mining machines from Iran to Kazakhstan, Dorjiyev also said that “no mining equipment is seen in Kazakhstan. My personal opinion is that most of the equipment in Iran doesn’t have legal documentation, so it cannot be imported legally to Kazakhstan.” Dorjiyev concluded:
“Overall conditions for mining in Central Asia are truly favorable only in Kazakhstan. Mainly due to excess of electricity and overall openness of the economy towards investments in the IT sector. Plus, the draft of the new bill has already been passed to parliament, we expect it to be approved by June this year.”
While Uzbekistan, Kazakhstan, and Kyrgyzstan are luring crypto mining operators promising favorable conditions, none of the countries has recognized digital currency as a legal tender or has an official position regarding digital assets. Holders that are citizens of Uzbekistan can sell their current investments on two licensed exchanges after undergoing Know Your Customer procedures, ostensibly to avoid the possibility of money laundering. Any crypto assets whose origin cannot be proved are illegal to transfer or own in the country. Cryptocurrencies were banned in Kyrgyzstan in July 2014 after the national bank warned it is illegal to use Bitcoin and other cryptocurrencies as a payment method. The government of Kazakhstan has not developed an official position regarding cryptocurrencies. However, the Astana International Financial Center has reportedly created a special regime for cryptos under its own independent legislative prerogative.
SEC Votes On Faster Review Process
The United States Securities and Exchange Commission (SEC) announced it would be streamlining the application process for investment companies, potentially resulting in expedited crypto and blockchain firms operating in a “more efficient and less costly manner.” In a July 6 announcement on the SEC website, the Commission said it had voted to adopt rule amendments for an expedited review process for companies under the Investment Company Act. In addition, the SEC referred to a “new informal internal procedure” for any other applications that did not qualify for this expedited process.
The announcement said it made the changes for a “more efficient” application process, and to provide “additional certainty and transparency.” The SEC said granting such exemptions could provide “important economic benefits to funds and their shareholders.” “The application process under the Investment Company Act is an important component of our regulatory structure,” said SEC Chairman Jay Clayton. “The changes approved today will modernize and streamline this process, resulting in improved transparency, reduced costs, and a more efficient use of our staff’s resources.” As part of the rules under the Investment Company Act of 1940, any company applying for a listing with the SEC faces a number of challenges to operate legally. The SEC said these changes would be effective 270 days following their publication in the Federal Register.
The Commission has been very hesitant to sign off on Bitcoin exchange-traded funds (ETFs), including that of New York-based WisdomTree. Arca Labs, running its ArCoin on the Ethereum blockchain, speculated that no platform will be available to trade its fund through any major securities exchange registered with the SEC. According to the new amendments, funds including EFTs that have required an exemption from the SEC in order to operate could qualify for an expedited review. The fund would need to file a third application “substantially identical” to others granted relief within three years. The SEC stated that in this case, the Commission will provide notice to an applicant within 45 days of the date of filing provided the company responds within 30 days. Reportedly, the review process for a typical IPO application with the SEC comprises three rounds of inquiries and lasts between one and two months. In January, Grayscale Bitcoin Trust became the first digital assets vehicle reporting to SEC standards following its application in November.
Expedia Working With Crypto Service Travala.com For Crypto Bookings
Expedia now allows its over 700,000 accommodations to be booked with cryptocurrency through crypto travel platform Travala.com. According to an announcement by Travala.com on July 6, the firm added over 700,000 accommodations to its crypto-powered travel platform’s already over 2 million options available in 230 countries. Senior Vice President at Expedia Group Alfonso Paredes said that the company aims to scale up Travala.com’s business faster than it did expand so far. Furthermore, he said that the firm also recognizes innovation and the importance of allowing users to choose their preferred payment method.
This is the result of a collaboration with a subsidiary of travel giant Expedia, dubbed Expedia Partner Solutions (EPS). EPS allowed Travala.com to access its Rapid application programming interface, which allows the firm to offer Expedia’s accommodations to its users.
In November 2019, Travala.com struck a similar deal with Booking.com and added its over 90,000 accommodations to its platform. Data shared by the firm in January revealed that the firm saw its revenue increase by 33% after the partnership. Furthermore, crypto accommodation booking Travala.com also merged with cryptocurrency flight booking service TravelByBit in late May. This merger is meant to scale up the platform to give a more thorough service to travelers wishing to spend crypto-assets.
Huobi Is Now The First Major Exchange to Run a Chainlink Node
Major cryptocurrency exchange Huobi will integrate their price data with Chainlink’s ecosystem in an effort to improve its own data integrity and provide more accurate price information. While Binance was the first major exchange to provide their data to Chainlink oracles in October 2019, Huobi has gone one step further by running its own node on the system through Huobi Wallet. This allows the exchange to sign its own price data allowing users to confirm that any exchange data coming from the Huobi Node is authentic and direct from the source. Huobi Wallet CEO Will Huang stated:
“DeFi offers a unique value proposition of providing financial products that are transparent, open, and programmable. We are very excited to accelerate our involvement in this emerging trend by providing Chainlink users access to Huobi Global exchange data, as well as running our own Chainlink Node.”
The first batch of price pairs will include BTC/ETH, BTC/USDT, ETH/USDT, and LINK/ETH, with more to follow.
Huobi appears to be on a mission to improve its credibility following concerns around volume inflation last year. By running a node, the exchange’s reputation will be on the line should any of the data shared through Chainlink prove to be inaccurate. As one of Gibraltar’s largest crypto firms, the integration comes in the wake of the country’s continued efforts in reducing market manipulation by crypto firms over the last few months. Last year Huobi partnered with Global Digital Finance (GDF), co-chairing the Market Integrity Working Group with Solidus Labs.
In 2019 a Bitwise report implied that Huobi was reporting inflated trading volume, causing an internal investigation to weed out any potential wash trading strategies by market makers. Huobi Global CEO Livio Weng admitted wash trading may have occurred:
“We did identify a few of our market makers conducting what we suspect may have been wash trading for the sake of performance and marketing purposes. We have already communicated with these market makers and they have discontinued the strategies in question.”
Huobi has since moved to the top 10 exchanges in Messari’s ‘Real Volume’ list.