Cryptocurrency in Kazakhstan: What Is Permitted and What Is Not

Despite the widespread digitalization that positions Kazakhstan as a leader in this area, not only among CIS countries but also globally, the official status of cryptocurrency in the country’s economy remains in a "gray" zone. On the one hand, regulators strive to stay abreast of modern economic trends; on the other hand, authorities act cautiously, wary of the decentralized nature of blockchain and the consequent risks of the shadow economy. Additionally, tax authorities have yet to develop transparent and comprehensible mechanisms for taxing all crypto market participants.

The Mining Boom in Kazakhstan

In the history of cryptocurrency development, Kazakhstan has secured its small yet notable paragraph. Beginning in 2018–19, the absence of regulation in this new industry and any applicable legislation (as the saying goes in Kazakhstan, what is not forbidden is allowed), along with relatively cheap electricity, attracted a massive number of miners, both legal and semi-legal mining farms. To the surprise of many, by 2021, this had propelled Kazakhstan to second place (after the USA) in terms of global cryptocurrency production. Accustomed to extracting tangible resources from the country's depths, authorities quickly implemented amendments to tax legislation, compelling miners to pay taxes on a progressive scale. However, the anticipated miracle did not materialize – as most gray miners left for less regulated economies worldwide, the mining fever in the country subsided.

Cryptocurrency Risks, Speculation, and Fraud

The crypto market, conducive to speculation, unregulated, and prone to extreme volatility, does not inspire confidence in the authorities. On numerous waves of "hype," investors have lost vast sums of money, and fraud has flourished around the market in sometimes absurd ways (recall cases of certain individuals selling physical metal coins with the Bitcoin logo to unsuspecting passersby on the street). The first scandals about manipulations and collapses of major exchanges have also emerged.

Changes in the Country's Cryptocurrency Market

Nevertheless, while reforms are maturing in the regulator's and legislative chambers' offices, the turnover of non-fiat money is permitted within the framework of the Astana International Financial Centre (AIFC) – the country's main financial hub with a special legal status. In the AIFC, cryptocurrency is considered a medium of exchange and savings, as well as a unit of account. Operations with virtual money, such as buying or selling for fiat currency (the official currency of the country), are allowed. Previously, these transactions were only available to legal entities and individual entrepreneurs. The AIFC positions cryptocurrency transactions as a separate type of market operation and provides services to help counterparties buy, sell, and exchange cryptocurrency for fiat money and trade one digital asset for another, but only AIFC participants can perform all these operations.

Licensed Cryptocurrency Exchanges in Kazakhstan

Since the beginning of 2024, the issuance of certain types of stablecoins has been allowed within the AIFC framework. Eight cryptocurrency exchanges have been officially licensed: Binance, Bybit, ATAIX Eurasia, Biteeu, CaspianEx, BigOne, Delta DA, and Xignal&MT, with only ATAIX being Kazakhstani. The exchanges themselves have integrated with some second-tier banks (BVT) to simplify trading procedures – exchange accounts can be replenished directly from a card. Each platform, as required by the AIFC, has a Money Laundering Reporting Officer (MRLO) to report on the situation with money laundering.

Regulation of Cryptocurrency Exchanges by the National Bank of Kazakhstan

The regulator strives to maintain maximum control over the process and cautiously liberalizes the crypto market: trading is allowed only with AIFC-licensed currencies (currently, there are 106), and the currencies undergo strict scrutiny. For example, tokens with anonymization features usually do not pass this check. When deciding to allow a new cryptocurrency to trade, various aspects are considered: transparency (in terms of creation, protocols, blockchain, founder), approval in other countries' jurisdictions, traceability, token count, capitalization, liquidity, and volatility.

Available Operations on Cryptocurrency Exchanges

The range of operations is also relatively regulated: in the Kazakhstani version of the Binance exchange, P2P operations, Binance Earn, and futures trading are unavailable. However, according to the regulator's representative, the introduction of new products is actively being discussed with the platforms.

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Despite sometimes polar assessments of cryptocurrency as a familiar financial tool of the future, Kazakhstan, aimed at maximizing integration into the global economy, having made significant strides in digitalization and cautious liberalization of its internal economy, will likely inevitably become a participant in the free global cryptocurrency market. However, amid all the internal problems and geopolitical phenomena, this process might take some time.

This article has been translated from its original language using neural network-based translation technology.