National Bank of Kazakhstan is developing a platform for testing the new digital tenge. The regulator has already published its strategy on the issue.
Digital Tenge – What is that?
The digital tenge is a new, very promising type of money, which should be issued by the National Bank. This digital currency will be a legal payment facility, standard of value and store of value. However, the regulator is not going to replace cash or non-cash money; the new currency must be used as just another financial instrument.
Currently, the regulator is reviewing all the aspects of the digital tenge. Within the project, the National Bank is going to launch a pilot project on digital tenge and do some research. Also, the regulator wants to discuss the topic with market participants and international partners.
Once all this work is done, the National Bank will decide whether digital tenge would be worth implementing. In case of a positive decision, the regulator should develop some rules for technical infrastructure and regulation to protect consumer rights.
According to the report of the National Bank, the platform, which is being developed, is designed for testing. To implement the project, two-level architecture will be created. At the first level, banks are supposed to provide financial services and at the second level, the National Bank will be responsible for the entire infrastructure.
The first digital tenge will be available for a wide range of users including individuals and non-financial organizations. Technically, the digital currency should work as tokens, which can be moved from one electronic wallet to another. One token will be similar to one regular tenge.
Pro and Cons
The National Bank expects that the introduction of digital tenge will ensure further development of the national payment system and reduce dependence on cash. Thanks to technological features, the new digital currency would require no internet to make a payment; it means that the currency might be used in a rural area.
In addition, the digital tenge will stimulate the creation of new payment services based on the mechanism of “smart contracts”. The regulator expects that this may lead to an increase in the supply of new financial services boosting Kazakhstani market of fintech.
At the same time, there are some risks, the international experts said. Widely available digital currency may cause outflows of funds from regular commercial banks. To avoid this scenario, the National Bank has chosen the option of new digital currency with no interest.