Kazakhstan almost legalizes crypto payments but not quite

Kazakhstan claims it has finalized the legalization of crypto transactions in its economy with an updated legislation that entered into force earlier this month.

While cryptocurrency payments are now supposedly legal, too, it has become clear that the fiat tenge remains the only legal tender in direct purchases.

Kazakhstan adopts rules for crypto circulation

Cryptocurrency has been formally recognized in Kazakhstan since the enforcement of the law “On Digital Assets” in 2023. But legal options to transact with it were quite limited.

One could easily buy digital cash or acquire it through mining, but there was almost nowhere to spend it or convert it domestically without breaking the law.

Before the latest push to resolve the issue, Bitcoin had already ceased to be something exotic, as noted by the 24.kz news channel on Wednesday, and many Kazakhstanis were already invested in crypto.

However, trading was only permitted through a handful of exchanges registered at the Astana International Financial Center (AIFC), the fintech hub in the capital city.

As a result, some 95% of the country’s crypto turnover was taking place outside this regulated market, the Tengrinews.kz website remarked last week.

Digital coins were changing hands either within the gray sector of the economy, including in peer-to-peer deals and on unofficial exchanges, or through foreign-based platforms.

Amendments were made to the Digital Assets act at the start of month and bylaws adopted by the National Bank of Kazakhstan (NBK) to bring these flows out of the shadows.

The revamped legislation introduces comprehensive and systemic regulation for cryptocurrency circulation in the Central Asian nation.

That includes a more detailed classification of digital assets, which are now divided into two main types – secured and unsecured.

The latter category includes regular cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), the value of which depends mainly on market demand.

And the former covers tokens backed by real assets like gold, commodities, or fiat money in reserve. Such is the stablecoin Tether (USDT), for example, which is pegged to the U.S. dollar.

Then, the updated framework adds the term “digital asset service providers,” also defined as licensed market participants, supervised by the NBK.

These will include issuers of tokenized assets, operators of trading platforms like crypto exchanges and those of offices offering only crypto-fiat exchange.

Asan Akhmetzhan, head of the monetary authority’s press service, was quoted as stating:

“Unified rules have emerged for everyone … We are consciously moving from a restrictive approach to regulated circulation. Now it’s possible to buy, sell, and store cryptocurrency.”

But what happens with crypto payments?

Officially, cryptocurrency payments, as a part of the digital-asset turnover, were also legalized in Kazakhstan on May 1, both local media reports highlighted.

It turns out, however, that Kazakhstani citizens won’t be able to buy a coffee or pay their rent using Bitcoin, as explained by experts interviewed by the news outlets.

Spending digital coins for purchases will be possible only through instant conversion to the national fiat handled by a licensed intermediary, in which the seller receives tenge, not Tether.

From a legal standpoint, crypto is not a means of payment yet, emphasized Kirill Greshnikov, a lawyer who commented for Tengrinews:

“We need to dispel the main myth: direct payments with cryptocurrency are still prohibited in Kazakhstan.”

What the authorities mean with “legalization of payments” is merely the introduction of the digital assets into civil circulation, he elaborated.

These assets, recognized as property, can only serve as a source of funds, added Dmitry Zaika, a representative of a licensed domestic exchange.

To use them for payment, one needs to register on a platform like his, pass identity verification, open and top up a crypto wallet.

Then they need to have one of those CryptoPay cards, issued in Kazakhstan with Mastercard and linked to a payment app like Apple Pay, Google Pay, or Samsung Pay, he explained further.

This scheme allows coins to be spent almost everywhere. But while the buyer perceives the transaction as a crypto payment, the seller receives tenge, which remains the legal tender in Kazakhstan.

“The only means of payment in our country is the tenge. Cryptocurrency also is in some countries, but legalization did not change this here,” financial analyst Andrey Chebotarev told 24.kz.

While commenting on the rise of non-cash payments, which already exceed 80% in Kazakhstan, and the growing use of the digital tenge, President Kassym-Jomart Tokayev recently emphasized on the need for coordinated institutional efforts to transform the country into a crypto hub.