Poor integration with banks hinders development of crypto market in Kazakhstan

Slow integration with the banking system and problems with money transfers through correspondent banks are the key barriers hindering the development of the cryptocurrency market in Kazakhstan. This conclusion stems from a survey by experts from RISE Research, Freedom Horizons, the Astana International Financial Centre (AIFC), the National Payment Corporations of Kazakhstan, Mastercard and KPMG Caucasus and Central Asia.

The weak connection between banks and crypto exchanges makes it more difficult to process transactions from fiat money to cryptocurrency, slowing the industry’s overall development. Limited awareness among the population and a lack of cryptocurrency sellers also hinder the growth of the industry’s liquidity.

«According to our survey and interviews with market participants, limited access to banking services is the key obstacle to developing digital assets in Kazakhstan. Many banks aren’t eager to work with companies from this sphere, perceiving them as more risky clients. Of course, this hinders money transfers and account keeping,» the survey reads.

Nevertheless, over the past few years, Kazakhstani legislators have adopted a set of rules regulating the cryptocurrency market. These changes create favorable conditions for the development of innovative business models and the expansion of the range of scenarios for the use of digital assets. For example, the National Bank is developing the Crypto Card project, which is expected to be implemented in pilot mode next year.

According to Yerkegali Yedenbayev, Managing Director at the Astana Financial Services Authority (AFSA), cryptocurrencies «play a crucial role in the transformation of Kazakhstan’s financial system,» facilitating the inflow of investments and accelerating economic growth. Sanzhar Zhamalov, Mastercard’s country manager in Kazakhstan and Central Asia, emphasized that Mastercard will continue supporting the needs of the crypto ecosystem in Central Asia and promoting innovation in digital payments. As he noted, crypto cards issued by the payment system and its Multi-Token Network platform help traditional finance and the world of cryptocurrencies work together.

Currently, there are 14 cryptocurrencies registered with the AIFC, as Kazakhstan’s legislation allows the turnover of crypto assets only within this platform. Over the past two years (from early 2023), 11 crypto exchanges conducted transactions worth more than $800 million. As of October 2024, more than 140,000 people were registered with Kazakhstani crypto exchanges as regular users.

From January through August, cryptocurrencies paid $367,000 in taxes, a significant increase compared to $275,000 in 2023. On the other hand, over the period from January to October, digital miners transferred about $10.4 million to the budget. For comparison, in neighboring Uzbekistan, the crypto industry has reported $3.6 million in payments to the state budget since 2022.

Another Central Asian nation, Kyrgyzstan, is the regional leader in terms of registered suppliers of virtual services, with 126 companies as of October 2024. This business thrives in Kyrgyzstan as obtaining a corresponding license in the country is not hard. According to some preliminary data, crypto exchanges account for 98% of these businesses.

Experts estimate that only 4% of the population in Kazakhstan possessed cryptocurrency in 2022. This year, that rate has doubled to 8%. Binance, an international crypto exchange operating in Kazakhstan, presented similar statistics in the middle of August. According to its estimates, in 2022, 3.95% of Kazakhstanis owned cryptocurrency, increasing to 7.22% as of late 2023.

Binance also reported that Kazakhstan was ranked 19th in terms of cryptocurrency popularity in the world. More generally, the continent of Asia is the leader in cryptocurrency, as 326.8 million people here own these asset. Moreover, their number has grown by 22% since the end of 2023. In Central Asia, Uzbekistan holds the first position in the popularity of cryptocurrency, with more than 500,000 people possessing crypto assets as of last year.