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Cryptocurrency: Advancing Kazakhstan’s Economy and Investment?

March 28, 2018 • FINANCE & BANKING, Asia - Pacific, Banking Innovation, Global Capital Markets

By Samantha Brletich

Aimed at developing markets, cryptocurrency, and attracting investment, Kazakhstan created the Astana International Financial Center (AIFC). Such move, however, is not a panacea for Kazakhstan’s feeble investment climate as it has to take institutional and legislative steps – if it is to build greater economic partnerships and diversify its investments.

 

Kazakhstan has been implementing measures to increase investment including marketing campaigns, reforming laws, market reforms, and engaging with Europe. Oil & gas production and export, mineral deposits and mining, and transportation form the backbone of its economy. Kazakhstan, despite being run by an authoritarian, is fairly open-minded concerning economic agreements and finance. Kazakhstan has managed to operate its mixed economy – characterised by private sector freedoms and state planning – to become the largest economy in Central Asia. Integrating cryptocurrencies further advances Kazakhstan’s efforts to become an innovation hub and top-tier investment partner in the region.

As Kazakhstan continues to promote itself as the land of innovation and as the bridge between Europe and Asia, the adoption of cryptocurrencies, or creation of a state cryptocurrency, has been considered an alternative to attract investment.

As Kazakhstan continues to promote itself as the land of innovation and as the bridge between Europe and Asia, the adoption of cryptocurrencies, or creation of a state cryptocurrency, has been considered an alternative to attract investment.  The government announced in July 2017 for Kazakhstan to become the “the most [favourable] business climate” for cryptocurrency and financial technology (fintech) companies.1  The Astana Times reported on 23 November 2017, that Kazakhstan established a Kazakhstan Blockchain and Cryptocurrency Association (KABC).2 The Association was created to regulate the lucrative cryptocurrency markets and work with the country’s national bank regarding cryptocurrencies.1

Kazakhstan may issue the state- sponsored CryptoTenge, to regulate and integrate into its financial framework and to explore non-extractive industries. The currency would be a fiat currency, recognised as legal tender which is state-controlled. The issuance of the CryptoTenge would make Kazakhstan the first country in Central Asia with its own cryptocurrency and mark significant progress in Kazakhstan’s digital economy, diversifying Kazakhstan’s economy and the use of alternative financial instruments. Kyrgyzstan in June 2014 planned to issue its own cryptocurrency called GoldenRock,3 however as the status of this cryptocurrency is unknown, Kyrgyzstan declared the use of cryptocurrency as a form of payment illegal.4

Kazakhstan created the Astana International Financial Center (AIFC), an innovation hub aimed at developing markets, cryptocurrency, and attracting investment; the AIFC will have its own courts based on Common Law and the language will be English.5 Deloitte highlights that “the Fintech regulatory Sandbox, a special regime for innovative projects within the [AIFC provides] unique advantages for attracting capital to different projects from around the world.”6 Furthermore, deregulation of blockchain technology “enables financial services to be performed not just by established banks but also by specialised start-up companies.”7 

 
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About the Author

Samantha Brletich is a freelance writer and researcher on the region of Central Asia and the Former Soviet Union. She focuses on extremism and terrorism, governance, economics, and multi-lateral policy in the region. She has a Master’s in Peace Operations Policy from George Mason University in the United States.

 

References

1.Haig, Samuel. Kazakhstan Seeks to Become Regional Hub for Cryptocurrency Industry. News, BitCoin.com. https://news.bitcoin.com/kazakhstan – seeks – to – become – regional – hub – for – cryptocurrency – industry/

2.Dyussembekova, Zhazira. Kazakh organisations form Blockchain and Cryptocurrency Association. The Astana Times. https://astanatimes.com/2017/11/kazakh – organisations – form – blockchain – and – cryptocurrency – association/

3. Lyon, Nina. First Country of the Eurasian Economic Union to Issues Its Own Cryptocurrency. CoinIdol.com https://coinidol.com/kyrgyzstan – to – issue – cryptocurrency/

4. Rizzo, Pete. Kyrgyzstan: Bitcoin Payments Violate State Law. CoinDesk. Kyrgyzstan: https://www.coindesk.com/kyrgyzstan – bitcoin – payments – violate – state – law/

5. Astana International Financial Centre. Homepage. http://www.aifc.kz/

6. Deloitte (13 July 2017). Kazakhstan becomes the second government to embrace the cryptocurrency market system. https://www2.deloitte.com/ru/en/pages/about – deloitte/press-releases/2017/kazakhstan-becomes-the-second-government-cryptocurrency-market-system.html, accessed 4 December 2017.

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8. Deloitte. Kazakhstan becomes the second government to embrace the cryptocurrency market system. Deloitte. https://www2.deloitte.com/ru/en/pages/about-deloitte/press-releases/2017/kazakhstan-becomes-the-second-government-cryptocurrency-market-system.html

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20. EFE. Expo 2017 Astana complex to become Crypto Valley. https://www.efe.com/efe/english/business/expo-2017-astana – complex – to – become- crypto – valley/50000265 – 3385089

21. Mayor’s Office of Astana. Astana Business Campus Will Open Its Doors in 2018. http://astana.gov.kz/en/modules/material/8519

22. Ministry for Investments and Development, Republic of Kazakhstan. 100 Concrete Steps. http://mid.gov.kz/en/kategorii/100-konkretnyh-shagov-0

23. United States Department of State, Bureau of Economic and Business Affairs. Kazakhstan. https://www.state.gov/e/eb/rls/othr/ics/2017/sca/270019.htm

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25. Freedom House. Kazakhstan: Authorities Arrest Editor of Last Independent Newspaper. https://freedomhouse.org/article/kazakhstan – authorities – arrest – editor – last – independent – newspaper

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