Kazakhstan regularly hits the world’s headlines as being a prominent Bitcoin mining country – in fact, it reached number 1 on the Coincub top five mining countries worldwide based on its ratio of mining to GDP. Whilst the Kazakhstan government was, and is, keen to incentivize mining, with the numbers of operations set to increase further, that alone doesn’t make the country a leading crypto-friendly country when wider criteria are applied.
Cryptocurrency is legalized and the country’s central bank, the National Bank of Kazakhstan, has been actively promoting the concept of a Central Bank Digital Currency (CBDC) but this is something that many central banks around the world are also well-advanced with.
When it comes to legislation, the country has had a light touch, to say the least, around cryptocurrency and only now is considering progressive Anti-Money Laundering (AML) regulations for virtual asset service providers (VASPs), again, this is something that most countries have implemented. Such legislation would require that providers of digital assets have to inform the Ministry of Digital Development, Innovation and Aerospace Industry which will then undertake a risk assessment incorporating Know Your Customer and AML regulations. That said, there persists the belief in some quarters that the proposed new legislation does not extend far enough into companies that trade within the wider crypto economy.
The gains from cryptocurrency mining operations are taxed at a very low rate of 15% – partly to incentivize mining, but also to potentially increase the total taxable tax by incentivizing compliance. As a coal and oil state, crypto mining is seen by the government as a form of diversification for the economy.
Kazakhstan produces relatively inexpensive electricity – a godsend for miners – giving the country a competitive advantage, much like Iceland. How electricity supplies and the price of mining pan out following the Ukraine invasion may have a bearing on future activity, however. To date, and based on pure numbers, Kazakhstan is second only to the US in the volume of Bitcoin it produces. Illegal mining, however, persists and is seen as a big problem, making it a number one target for action by the state. Energy consumption is on the rise and to maintain its position as a leading crypto-mining state, the country will need to reorganize and update the wider infrastructure that produces its power.
Kazakhstan appears to have all its eggs in one basket with the mining of crypto, whereas many advanced crypto economies are looking further and seeing the much wider, and potentially longer-lasting, benefits of blockchain technology for the wider economy. To this end, the highest-ranking crypto economies have well-advanced blockchain-driven business communities and learning courses. However, blockchain technology is becoming a more prominent subject for further education in the country.
Unichrone offers an interactive Blockchain Training Course in Kazakhstan for IT professionals and individuals covering cryptocurrencies and the essential fundamentals of Blockchain and its uses in various industries. Generally, however blockchain studies remain underdeveloped with only a handful of courses available. The wider blockchain community also appears to have suffered from the country’s wider success with the export of natural resources such as oil and gas, perhaps meaning that the advancement of blockchain technology, which plays a prominent part in developed economies, has suffered from neglect.
Initial Coin Offerings
As with blockchain technology generally, Initial Coin Offerings (ICOs) appear to play no leading role in the Kazakhstan economy. Despite this, the country has an active start-up economy with a wide and varied number of tech organizations. The Astana International Financial Centre (AIFC), through its Tech Hub located in Kazakhstan’s capital Nur-Sultan, helps to bring new tech initiatives to Kazakhstan, promoting innovation and acting between Kazakh banks and businesses. Nazarbayev University has its own Innovation Cluster, and NURIS has supported 157 startups. In 2021, Astana Hub opened its first branch in Almaty, a city where some 40% of the entire market of technological goods and services in Kazakhstan is located.