Bordering Russia and China, Kazakhstan is a resource-rich nation that has emerged as the leading crypto jurisdiction in Central Asia over the past two years. The new government, installed Feb. 6, has recommitted to digitization and transparency with a vision of becoming a technological hub. 

With a population of approximately 20 million, the former Soviet republic is no stranger to the crypto economy. Once one of the world’s leading centres for crypto mining operators, the government was forced to stamp out this industry in 2021 due to depletion of the country’s power supply. Since then, Kazakhstan reinvented its relationship with the crypto economy via the formation of a crypto regulatory framework to position the country as a global contender for inbound blockchain infrastructure and investment.

I spoke with Yagub Zamanov, director of the fintech division of the Astana Financial Services Authority (AFSA). AFSA governs financial regulation and the awarding of crypto licences within the Astana International Financial Centre (AIFC). 

AFSA is meant to “facilitate business by maintaining the safety and robustness of the AIFC financial system and to ensure that financial markets in the AIFC are fair, efficient and transparent.” 

Zamanov told me, “Kazakhstan has always led in terms of financial industry and financial regulation in the region, so this is just the next step.” Since the establishment of the AIFC in 2018, Kazakhstan has based its legal system on British Common Law.

Kazakhstan showcase and Spectrum during Singapore Fintech Festival 2023. (L-R) Timur Onzhanov, Executive Director of AIFC Authority,  Yagub Zamanov, Director of the Fintech Division at Astana Financial Services Authority, Athena Miao, Vice President of Business Development of BigONE, Lily Chan, Regional Sales Director of Chainalysis.

Since 2021, AFSA has been rolling out a digital asset roadmap to develop a comprehensive digital ecosystem. From 2022-23, a series of consultations and a pilot project with the commercial banks of Kazakhstan, as well as eight licensed international and local crypto exchanges licensed in the jurisdiction, culminated in the publication of the Digital Asset Activities rule book. 

Zamanov explained, “Previously, we didn't have any rules related to stable coins or tokenization. So again, our approach was to test, see the results, and then introduce the regulation in close consultation with the market participants. So our process is totally transparent, protecting the market and keeping market integrity.”

Towards the end of 2023, the government reported it had blocked 980 illegal cryptocurrency exchange platforms from operating within the country, including Coinbase, which was providing services in the market without a license. AFSA has reported that currently over 2,200 firms from 78 countries are registered in the AIFC offering the full suite of financial and related services.

More work to do

While Zamanov is proud of the work done to date to position Kazakhstan’s reputation in Central Asia, he is cognizant that it is vying against several leading jurisdictions, the closest geographically being the United Arab Emirates. 

Even so, Zamanov explained that cooperation and collaboration lies at the heart of the AFSA’s approach to growth and good governance. He and his colleagues regularly attend crypto policy conferences around the world to meet peers and learn. AFSA is a member of IOSCO, the International Organization of Securities Commission, and is the first regulator in the regions of Central and Eastern Europe, Central Asia and Caucasia to become a signatory of the Enhanced Multilateral Memorandum of Understanding ("EMMoU"). He mentioned that in the coming year, AFSA will be looking into the tokenization of stable coins as well as commodities. 

“The consensus among the worldwide regulators and policymakers is that it is better to regulate rather than to prohibit,” Zamanov said. “We have tried to combine the best international practices, as well as introduce local specific requests tailored to our jurisdiction.  It is a jurisdiction that thinks about its participants.”