Kazakhstan has become a key participant in the cryptocurrency market in the world and especially in the Eurasian context. In the last five years, it has changed its status as an unknown player to a relevant authority on Bitcoin mining, cryptocurrency rules and regulations, and financial innovation using digital means. In my article I will discuss that how the bond between these processes is the geopolitical changes, regulatory foresight, and infrastructure investments that make Kazakhstan a leader in cryptocurrency in the Eurasian regions.
That was the moment when Kazakhstan found its niche as a Bitcoin mining hub when China, which was the world Bitcoin mining epicenter, banned all cryptocurrency mining activities in the middle of 2021. Such abrupt action compelled miners to hunt other spots with low electricity costs, political stability, and favorable regulations. Kazakhstan very soon became an attractive destination as it had large capacity of coal-generated power and the relatively permissive policies. As of August 2021, almost one-fifth of the world hashing power on Bitcoin migrated into Kazakhstan and caused the country to be ranked the third-largest world contributor to Bitcoin mining worldwide.
Crypto Mining Formalization
Such a speedy deployment of mining, though, put a heavy burden on the energy infrastructure of Kazakhstan. According to the increased load on the power system, there were certain periods of blackouts such as a very serious one that happened in January 2022 and affected not only Kazakhstan but also the surrounding nations. The core of the problem was the emergence of illegal or so-called grey miners who were not governed by any regulatory provision and used vast energy resources out of the grid. Such operations caused the government to be decisive.
The Kazakh government started to crack down on these illegal miners by enforcing them strongly. Governments insisted that mining activities be automated in terms of electricity measuring and imposed fines, seizure of machinery and even shutdown. Besides the enforcement, a tax fee of 1 Kazakhstani Tenge per 100 kilowatt-hours was put in place on the mining process. During 2023 the Kazakh government shutdown 36 illegal crypto exchanges and seized thousands of mining rigs. The intentions of these steps included the cleaning up of the industry, balancing the energy grid, and creating a foundation of cryptocurrencies as a formalized industry.
Regulation by AIFC
The broadest cryptocurrency law formalized in April 2023 under the law named On Digital Assets. According to the law, any crypto miner was to be registered with the Ministry of Digital Development and become a subject of formal licensing regime with three-year lifespan. Also, the miners were to join formal mining pools, and by the fact, 50 percent of the total quantity of the mined asset ought to be sold on the licensed exchanges that fall under the supervision of the Astana International Financial Centre (AIFC). This number will increase to 75 percent in 2025.
The energy policy was also reformed in order to make mining not to affect the national infrastructure. Electricity was only available to the miners during surplus time and via government approved means and the miners were obliged to be involved in auctions held by KOREM the state electricity exchange. Such actions were coupled by fiscal policies such as a 15 percent corporate tax and the tax on electricity use, which introduced the mining activities to the formal economy.
AIFC Roles
The Astana International Financial Centre (AIFC) turned into the center of the crypto strategy in Kazakhstan. Planned as a regional financial centre and having its own legal and regulatory framework, the AIFC provided a definite direction to digital asset companies to obtain legal status and work. Its regulator the Astana Financial Services Authority (AFSA) has a detailed rule book that comes in to effect in January 2024. These came in the form of anti-money laundering, cybersecurity measures, custodial requirements, stablecoin regimes and consumer protection.
In this context, such high-profile exchanges as Binance Kazakhstan, Bybit, and ATAIX Eurasia obtained the license to operate. Furthermore, the AIFC has already introduced a regulatory sandbox, called the FinTech Lab, where it tested such innovations as decentralized finance wallets, stablecoin payments, and integration with Kazakhstan and its developing central bank digital currency (CBDC). Such measures helped Kazakhstan become among the pioneer nations in the Eurasian region in promoting a complete lifecycle of operations of digital assets including their mining and trading, and the innovation with the support of the country central bank.
The other stand out of Kazakhstan as a leader in the crypto space is the development of a Central Bank Digital Currency; the digital tenge. The digital tenge was first conceptualized in 2021 with pilots in 2023 and in limited public use at the end of 2024. The first public issuance of the digital tenge through Visa and Master Card was made in November 2023, which means that it can be included in such mobile payment systems as Apple Pay and Samsung Pay. The government will collaborate with the digital tenge as a cross-border payment tool, social benefits, and offline payments, with the view of enhancing the inclusion of financial services and corruption alleviation.
Kazakhstan government to develop its own state cryptocurrency reserve, on top of this holistic plan. This action will strengthen the financial stability of the country and ensure the government has a larger hold over its digital economy.
Nevertheless, Kazakhstan has its problems despite these steps. The outflow of cryptocurrency because of loopholes in regulation and non-licensed exchanges is working rules and regulations of government. This has caused a more strict regulation, as stronger regulations against money laundering, a prohibition on crypto advertising, and criminal jail time in case of illegal transfer of digital assets are suggested. The government is also trying to make the crypto transactions more transparent by initiating a stronger KYC and enhanced transaction tracking.
Environmental Cost
Another issue of concern about the crypto expansion in the country has been the environmental impact of the crypto expansion in Kazakhstan. The greatest part of mining activities is conducted by coal-based electricity that also contributes greatly to the carbon footprint of the country. Critics cast doubt on the gainful economic value of crypto mining because it is eroding the health of the environment. As a counter balance movement, the government has urged mining firms to switch to renewable sources of energy and it has implemented policies that restrict the amount of mining that occurs during peak energy usage times. The shift to green energy however, is still taking long especially because of infrastructural and monetary obstacles.
Such institutions as the Ministry of Digital Development or the National Bank of Kazakhstan are leading the efforts to incorporate crypto into the national economic strategy of the country. Policymakers such as Jaslan Mädiev— A former executive in Binance have had a prominent role in policy making. The policy has also been formulated by international legal and financial organizations such as the International monetary fund as well as the global law firms such as Morgan Lewis.
What is interesting, compared to neighboring countries, Kazakhstan is distinguished by a balanced position. Whereas China and Russia prohibit and have vague policy respectively, Kazakhstan hopes to take a middle ground between promoting crypt and having a firm regulatory environment. This puts Kazakhstan in the distinctive role to become the Eurasian FinTech center, particularly, since it keeps on gaining the world exchanges, investors, and developers.
The Kazakh model depicts the government that reacts fast to new economic situations and incorporates state-of-the-art financial technology, achieving a balance between risks and institutional protection. As the nation carries on with the development of its digital economy, its success will solely be determined by the level at which the country is able to better the energy infrastructure, enforce the compliance and a switch-over to embrace practices that are environmentally friendly. Provided that these obstacles are overcome successfully, Kazakhstan may turn out to be the model of how emerging economies can incorporate cryptocurrencies into their systems.
The story of Kazakhstan moving to be an energy-rich post-Soviet nation to a cutting-edge in the digital financial environment demonstrates the power of policymaking. It is an intentional transition in the state of uncontrolled growth to institutional maturity, and as such not only a leader in the region but a global example of how a country can use the disruptive opportunity of cryptocurrency to federate within itself.
Mr. Muhammad Ali Pasha is a “Foreign Affairs Expert”. Furthermore, he is a author and poet.
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