Cryptocurrency: Advancing Kazakhstan’s Economy and Investment?

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 

The AIFC signed an innovation pact with Maltese investment firm EXANTE. The working group led by the AIFC and established in July 2017, will regulate the cryptocurrency, establish the ecosystem, and “and [improve] the investment climate in Kazakhstan for development and support of innovative technologies.”8 Kazakhstan will receive EXANTE’s blockchain platform, Stasis, “the platform provides governments with an efficient platform to tokenise fiat currencies and transform them into digital versions on a block chain securely.”9 Stasis, which enables virtual instant payments with no risk of de-evaluation or hyperinflation of digital assets and the mobile application, selling blockchain-based bonds, will bring in investors.10

Cryptocurrency markets present Kazakhstan with the opportunity to become a regional leader in fintech. Cryptocurrencies would allow Kazakhstan to tap into unexplored markets in Asia and build economic relationships with cryptocurrency-friendly countries such as Singapore and Japan. Also the establishment of a cryptocurrency will modernise and make Kazakhstan’s economy more competitive and if successful, lessen the dependence on its extractive industries or make business easier in these industries.

The use of cryptocurrency would promote small and medium business entrepreneurship, because of its low cost and instant transactions, which remains a driver in Kazakhstan’s economic growth. Kazakhstan’s e-commerce sector remains underdeveloped and was projected to reach $5 billion by the end of 2017.11 Online shopping only accounted for 10-12% of all Internet services. 9 Kazakhstan can generate more investment by creating user-friendly cryptocurrency platforms and encourage businesses/merchants to accept cryptocurrency allowing for more cash payments and investment. The tourism, hospitality, and online merchant sectors would benefit from this move because of Western businesses and high-profile global events including the recent EXPO 2017 Astana. Therefore, cryptocurrency may boost non-extractive industries strengthening other sectors of the economy.

Also, cryptocurrency is part of the larger effort of the Kazakhstan Government to create digital economy. The “Digital Kazakhstan Program” was submitted for state approval in early December 2017,12 and focuses on four key initiatives – (1) creating digital silk road to secure infrastructure; (2) developing a creative society and skills to support the digital economy; (3) digital transformation of the economy; (4) and  creating a proactive digital economy which aims to improve electronic and mobile government systems.13 The program is to be implemented in two phases: the first phase was scheduled for 2016-2019 and the second phase is schedule for 2020-2025.14

Cryptocurrency advances Kazakhstan’s multi-vector foreign policy goal of economic development with foreign countries. Kazakhstan is party to the Eurasia Economic Union (EaEU) (also referred to as the EEU), and other multi-national political and economic organisations including the Shanghai Cooperation Organisation. The EaEU has a free trade policy and allows  for workers and goods to move within the common economic space – two areas that Kazakhstan  can improve for investment. Once Kazakhstan’s digital economy is developed, Kazakhstan can influence the economic policies of its powerful neighbors, Russia and China. Once other EaEU countries establish their cryptocurrencies, the EaEU can become a regional cryptocurrency market. In late December 2017, Vladimir Putin was considering creating a common cryptocurrency for the EaEU and the BRICS economic organisations. If Russia proposes a common cryptocurrency, Russia would dominate the EEU and the FSU states in cryptocurrency limiting the regional influence of Kazakhstan.15

By not utilising cryptocurrencies, Kazakhstan would miss multiple opportunities to advance their own digital economy, exploration of blockchain technology, and regional leadership role.

And it is not unrealistic that Kazakhstan would propose a regional cryptocurrency for Central Asia and the Customs Union to create a multi-cryptocurrency common economic market. Kazakhstan’s current regional cooperation with Europe and Asia indicates Kazakhstan seeks a higher position in the international system. Kazakhstan’s and South Korea’s blockchain regulatory bodies, KABC and the Korea Blockchain Industry Promotion Association (KBIPA) respectively, that agreed on cooperation “with Korean companies, known for their innovativeness, provides unique opportunities for Kazakhstan’s business.”16 By not utilising cryptocurrencies, Kazakhstan would miss multiple opportunities to advance their own digital economy, exploration of blockchain technology, and regional leadership role.

KZ Cash is the first regional cryptocurrency in Kazakhstan that was launched by a citizen of Kazakhstan and not by the government.17 KZ Cash became active on 21 October 2017 according to the social media feed.14 The cryptocurrency’s website, lists KZ Cash will be accepted by hotels, restaurants and other companies in the tourism industry to promote growth.18 The payment platform, Smart Pay, also created by a Kazakh citizen, provides merchants, hotels and retailers to offer the option of paying with bitcoin.19 The website cites Kazakhstan’s geographic location along the “Great Silk Road” guaranteeing its success.15 Kazakhstan’s geographic location would also ensure the success of its Crypto Valley, located in Astana, for the country.20 Furthermore, Kazakhstan’s improved investment climate and its developing digital economy would attract technology companies. The Crypto Valley would supplement the already operating Technopark and the Business Incubator, and the Science Park Astana Business Campus at Nazarbayev University opening in 2018.21

Cryptocurrency and the AIFC is not a panacea for the country’s investment woes. Institutional reforms must be undertaken to improve investment. In July 2015, President Nazarbayev declared five presidential reforms to improve investment as part of the “Kazakhstan 100 Steps” modernisation program, supported by the Ministry of Investments and Development: (1) creation of a modern government apparatus, (2) rule of law, (3) industrialisation and economic growth, (4) one shared future, (5) and a transparent and accountable state.22 The Government signed the 2015 New Entrepreneurial Code and new Labour Code to improve investment creating “single windows” for companies and offices where businesses obtain government services.23 Kazakhstan in November 2015, amended legislation on migration and employment to increase worker access; the rules were to take effect in January 2017.24 Kazakhstan also developed a new national investment strategy, supported by the Kazakh Invest National Company, and created a special export strategy embodied by the Kazakh Export National Company.

Foreign ownership and foreign business access to agricultural land, bureaucracy and unevenly applied laws, corruption, fickle legislation without exemptions and grandfather clauses, and government interference contribute to a less-than-ideal investment climate. Improving human rights (including freedom of speech and press) and labour conditions would attract more investment from foreign governments and businesses. It would also improve Kazakhstan’s overall reputation. In March 2015, Kazakhstan implemented constitutional reforms reducing presidential powers and allowing for a possible political transition; however, reforms did not impact Nazarbayev’s powers. Kazakhstan is still considered “not free” by human rights watchdog, Freedom House.25 An improved human rights record would expand Kazakhstan’s role in the UN and other intergovernmental organisations such as the Organisation for Economic Cooperation and Development, which it is seeking membership from.

Kazakhstan’s development of fintech can support new economic partnerships on cryptocurrency and strengthen relations with its Eurasian and Asian partners who are also developing their own digital economies.

With an improved investment climate and a probable cryptocurrency, Kazakhstan can become a modern investment partner. Kazakhstan’s development of fintech can support new economic partnerships on cryptocurrency and strengthen relations with its Eurasian and Asian partners who are also developing their own digital economies. Kazakhstan must balance innovation and democratic reforms with economic state control and regulation. With support of state programs, Kazakhstan strives to maintain their position as the most investor-friendly country in the region. Only after the creation of the CryptoTenge or the introduction of another cryptocurrency in the country, will investors be able to determine if cryptocurrencies’ impact on Kazakhstan’s economy.

Featured Image: Astana International Financial Center (AIFC)


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.



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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.