Authorities in Kazakhstan are taking steps to legalize crypto investments, but intend to prohibit the use of digital assets in payments in the country.
A new banking law will also fully regulate the establishment and operation of cryptocurrency exchanges, the activities of which will be overseen by the central bank in Astana.
Kazakhstan is not going to legalize crypto payments
Cryptocurrency users in Kazakhstan will not be able to use their digital coins to pay for goods and services, the local press reported, citing a high-ranking official.
That’s according to the bill “On Banks and Banking Activities,” currently under review in the Senate, the upper house of Kazakh parliament, which has been designed to regulate digital financial assets, including cryptocurrencies.
Quoted by the business news outlet Kursiv on Thursday, the head of Kazakhstan’s Agency for Regulation and Development of the Financial Market (ARRFR), Madina Abylkasymova, elaborated:
“For the first time in Kazakhstan, we will allow the creation of cryptocurrency exchanges, which will also be regulated by the National Bank (NBK). The use of cryptocurrency for payments will not be permitted, but it will be allowed for investment.”
Regulators will also compile a list of cryptocurrencies that will be available for purchase on pre-approved trading platforms, she added.
“Relevant organizations will provide services with clear restrictions and regulation” by the monetary authority of Kazakhstan, Abylkasymova emphasized.
Cryptocurrency transactions in the Central Asian nation are currently legal only when conducted through exchanges registered as residents of the Astana International Financial Center (AIFC).
The fintech hub has a special legal regime in place that is becoming too narrow to cover the country’s growing market for digital assets.
According to industry watchers, only about 5% of crypto investors in Kazakhstan are using these government-licensed exchanges, while the majority prefer the services of platforms still working in the “gray” economy.
Government in Astana poised to regulate crypto activities
Kazakhstan, which became a hotspot for cryptocurrency mining in the region after China enforced a ban on the activity a few years ago, has been addressing issues arising from the expansion of its crypto space.
The legislative amendments aimed at regulating the circulation of digital currencies like Bitcoin (BTC) in the nation’s economy, beyond the framework of the AIFC, were drafted in May of this year by the NBK and the ARRFR.
The regulatory bodies introduced a new category of market participants, namely crypto exchange service providers, which will be licensed and supervised by the central bank to swap cryptocurrency with fiat money.
The AIFC-based trading platforms and service providers will continue to operate as before and will not be directly affected by the new rules.
While the government has been trying to deal with power deficits caused by the influx of crypto miners, mainly through stricter regulations and electricity rates, it lifted some restrictions on the industry in November.
Not all is lost for crypto payments either. This past spring, President Kassym-Jomart Tokayev announced a plan to create a pilot zone for fintech innovations called CryptoCity, where coin payments will be permitted. The latter will be established in the town of Alatau, which will be granted a special status.
Kazakhstan has been recognized for its potential to become a major cryptocurrency hub in the wider region of Eurasia by major players in the industry.
The country is building a strategic national cryptocurrency reserve, which will ultimately hold up to $1 billion in leading digital assets.
At the end of November, the National Bank already earmarked $300 million for crypto investment, as reported by Cryptopolitan.
What’s more, the central bank also considers converting some of Kazakhstan’s foreign currency and gold reserves into crypto.