Two pieces of legislation signed by Kazakhstan’s head of state are going to relax rules for cryptocurrency transactions in the Central Asia nation.
Besides updating banking regulations, the laws aim to promote the integration of new financial technologies and digital assets in the country’s economy.
Kazakhstan’s leader approves laws regulating crypto turnover
President Kassym-Jomart Tokayev has signed Kazakhstan’s long-awaited laws “On Banks and Banking Activities” and “On Amendments and Supplements to Certain Legislative Acts on the Regulation and Development of the Financial Market, Communications, and Bankruptcy.”
Prepared by the Agency for Regulation and Development of the Financial Market, the acts seek to modernize regulation in the banking sector and ensure financial stability while promoting innovation, as well as to liberalize the circulation of digital assets.
One of the main goals of the legislation is to stimulate growth in the fintech sector, the watchdog announced Friday. In a press release published on the government’s online portal, the authority highlighted:
“The key innovation is the introduction of regulation for digital financial assets (DFAs) as a new asset class and the authorization of their circulation in Kazakhstan.”
The regulator further noted that the banking law defines three types of secured DFAs, depending on the underlying asset.
The first category accounts for those backed by fiat money, or stablecoins. The second includes DFAs based on financial instruments or assets, property rights, and goods. And the third represents financial instruments issued in electronic form on a digital platform.
In an arrangement similar to Russia’s regulation in the field, these tokenized real assets will be issued by platform operators licensed by the National Bank of Kazakhstan (NBK) and subject to requirements similar to those for traditional financial instruments regarding risk management, for example.
Besides them, the law also regulates what has been described as “unsecured digital assets,” or cryptocurrencies like Bitcoin. It provides for the establishment of crypto exchanges, the activities of which will also be licensed by the central bank.
The monetary authority will be tasked to prepare a list of cryptocurrencies allowed to circulate in Kazakhstan’s jurisdiction and introduce certain restrictions on crypto trading operations meant to ensure protection for investors. Participants in the market will be monitored to combat money laundering.
Kazakhstan to develop systems for mobile transfers and QR payments
Commercial banks will be permitted to invest in fintech firms, develop innovative financial products, and implement advanced banking technologies to improve their own competitiveness.
The traditional institutions will also be able to set up subsidiaries in order to get involved in artificial intelligence (AI) projects and in other advanced areas and technologies.
As part of the push for building the nation’s digital financial infrastructure, provisions facilitating the creation of systems for mobile transfers, QR code payments, and transactions with the digital tenge have been added to the law.
The status of the central bank digital currency (CBDC) as a new form of national fiat has been enshrined in the legislation. And the procedures for its issuance, circulation, and use will be determined by the National Bank.
Kazakhstan has been trying to establish itself as a fintech and cryptocurrency hub in Central Asia and the wider Eurasian region since it became a hotspot for mining a few years ago.
Miners were initially allowed to sell their minted coins only on platforms registered as residents of the Astana International Financial Center (AIFC), but last November, President Tokayev signed a different law lifting some restrictions on mining and trading.
Kazakh authorities announced their intention to legalize crypto investments through amendments to the banking framework in late December, as reported by Cryptopolitan. The country is building a $1 billion cryptocurrency reserve, and the NBK has already earmarked $300 million for that purpose.
While taking steps to legalize and liberalize the crypto market, the government has been cracking down on illegal activities in the space. The Financial Monitoring Agency of Kazakhstan (AFM) recently revealed it has restricted access to over 1,100 unlicensed crypto trading sites in the past year alone.