In the spring of 2018, the Astana International Financial Center (AIFC) developed and approved the Concept for Regulation of the Virtual Currency Market and Private Placement of Securities. Four years later, a pilot project was launched on the basis of the center with the participation of bitcoin exchanges and banks, which received the right to legally conduct cryptocurrency transactions.
Kazakhstan plans to become a regional cryptohub, but for this the country will have to improve the regulation of the industry and mitigate risks against the backdrop of a decrease in market capitalization and a series of bankruptcies of large international companies.
Cryplogger spoke with Yagub Zamanov, Director of the Financial Technology Department of the AIFC Committee on Financial Services Regulation, about new regulations for bitcoin exchanges, the development of local startups and the collapse of FTX.
Cryplogger (FL): Hello Yagub. In April, the financial regulator of Kazakhstan announced the initiative on the creation and development of exchanges based on the AIFC. How many crypto-related companies have received the center’s license so far?
Yagub Zamanov (Ya.Z.): To date, we already have nine licensed providers. Most of them are cryptocurrency exchanges: ATAIX, Biteeu Eurasia (Intebix), Binance, CaspianEx (Top Line), Upbit, Xignal&MT and Eurasia Blockchain eXchange; crypto broker QuantDART FinTech Limited, as well as tokenized securities exchange Bitfinex Securities.
As far as miners are concerned, they do not fall within the scope of our regulation.
Many jurisdictions associate the AIFC only with crypto exchanges, but we also issue licenses to other market participants that work with digital assets. Our task is to create a regulatory regime that takes into account the interests of all players.
FL: Some of the trading platforms you mentioned are taking part in a pilot project for interaction with commercial banks. What is it?
Ya.Z.: Exchanges have access to second tier banks (STB) and can now open bank accounts, accept fiat currencies from clients, exchange them for digital assets and vice versa.
The project involves crypto exchanges ATAIX, Intebix, Binance and five banks: Halyk, Freedom, Altyn, Evraziysky and Nurbank.
The Intebix exchange together with the Eurasian Bank have already announced plans to issue a crypto card. It could be quite an interesting product for the market.
In general, the pilot project is successfully operating under the strict control of the working group, which includes representatives of the AIFC, the National Bank of Kazakhstan, ICRIAP, ARRFR And AFM. At the end of 2022, we will sum up the results of this interaction in more detail.
FL: It turns out that any citizen of Kazakhstan can get access to crypto exchanges? Are there limits on the amount of investments?
Ya.Z.: As part of the pilot, we distinguish between retail and professional investors. Retailers, in turn, are divided into qualified and unskilled.
The first, as a rule, are novice investors in digital assets. They have a monthly limit of $1,000, which is $12,000 per year. An unqualified retail investor is only allowed to deposit assets up to this limit.
To become a qualified retail investor, it is enough to pass the test on the website of the crypto-exchange, show the necessary experience, knowledge and back it up with some kind of certificates. Limits no longer apply to such investors.
We classify licensed crypto market players as professional investors, for example, brokers.
FL: Are bitcoin terminals installed in the AIFC?
Ya.Z.: There are no such terminals on the territory of the AIFC. But I do not rule out that at some stage of market development they will appear in our country.
FL: The AIFC offers tax incentives to its members. To whom do they apply?
Ya.Z.: Licensed market participants until 2066 are exempt from paying progressive income tax. This was approved by a joint act between the AIFC and the Ministry of Finance of Kazakhstan.
Benefits do not apply to ordinary companies registered on the territory of the center as a legal entity. In this case, a license is required.
FL: What other benefits do residents of the center have?
Ya.Z.: The AIFC has legislation based on the principles of common law. It is quite extensive and covers most of the questions that digital asset service providers may have. In addition to this, we have an AIFC court capable of using case law in its activities.
In addition, licensed participants form a community with other market players. Crypto exchanges can keep in touch with each other and act as a united front on issues of interest to them.
FL: Have you noticed interest from traditional financial institutions in cryptocurrencies?
Ya.Z.: Operations with digital assets is a new field of activity both for STBs and for the country as a whole. Even judging by the pilot project, there are more participating banks than crypto exchanges. This way they can gain knowledge from cryptocurrency holders and have access to new technologies.
In the future, after the successful completion of the pilot, we hope to see the interest of other representatives of the traditional financial market.
FL: How much has the activity of citizens of Kazakhstan increased in the issue of buying cryptocurrencies?
Ya.Z.: Specific figures can be given after summing up the results of the project. But even if the AIFC is excluded from this formula, there has always been interest in cryptocurrencies in Kazakhstan. Especially it has grown in the wake of the popularity of mining.
I am sure that the ability to use their bank accounts for the official purchase of cryptocurrencies is a pretty good option for citizens who actively use the services of exchanges.
FL: Has the number of blockchain startups increased in the country?
Ya.Z.: If we take the blockchain technology itself, then there can be an absolute multitude of projects and not necessarily related to financial services. Their teams tend to be very progressive and offer innovative products. Interest in the development of this area has always been at a high level.
Bitcoin appeared after the 2008 crisis, at a difficult time for the traditional finance market. Therefore, many pinned their hopes on cryptocurrency as a replacement for money, greater decentralization, transparent transactions in the absence of intermediaries and control. But as a result, this did not happen, and now bitcoin is perceived more as an investment tool than as a settlement tool.
Perhaps the current crisis in the crypto markets will affect the number of specialized startups, but I think that this will be more filtering than the death of the entire industry.
FL: What do you see as the main benefit of the development of the crypto market for the economy of Kazakhstan?
Ya.Z.: First of all, these are new technologies, which, with the arrival of big players and the development of local startups, finally fall into everyday use.
Second, there are jobs. Promising young people who believe in the idea of digital assets now have the opportunity to work for crypto exchanges, big players, local and foreign startups. This is a matter of employment.
Thirdly, despite the existing benefits, the budget still receives income taxes from employees of cryptocurrency companies.
And, of course, STBs, in partnership with bitcoin exchanges, exchange experience and gain new competencies.
I am convinced that in the future we will see other advantages from the digital asset industry.
FL: Does Kazakhstan benefit from large players entering the market? Perhaps the AIFC has already received new applications for a license from well-known crypto projects?
Ya.Z.: Kazakhstan always wins when big names appear in the jurisdiction. The arrival of a large investor automatically multiplies all the positive effects listed above. Attracting investments is exactly what the AIFC was created for.
At the same time, the center provides an opportunity for Kazakh startups to develop and evolve into large companies. It also gives a boost to the entire industry.
I cannot yet announce information about new applications for licenses, I will only note that there is interest in the jurisdiction.
FL: Before the launch of the AIFC pilot project, the Ministry of Digital Development of Kazakhstan indicated that it sees its goal as “development of the country’s potential as a regional cryptohub”. At what stage is this work now?
Ya.Z.: In order to become a regional cryptohub, it is necessary to carry out certain work, first of all, to create favorable regulatory conditions. If they are, then the interest of large investors in the jurisdiction will also appear. Just saying it won’t happen.
FL: Speaking of regulation, what fresh initiatives is the AIFC preparing regarding the crypto asset market?
Ya.Z.: Since 2018, the center has continued to strengthen the legal regime and we are currently working on a rulebook for digital asset platforms. This is a centralized set of rules for crypto exchanges.
We will consult with the market to further improve these rules.
At the moment, we have approved the Policy Paper – a document that prescribes the main approaches and principles for the provision of financial services by crypto exchanges based on the AIFC.
In the next week or two, we will present it on the website for public consultations with the possibility of making comments.
FL: The previous months on the crypto market were marked by major bankruptcieshappened collapse of the FTX exchange. Against this background, what are the main risks in the industry that the AIFC identifies and how does it plan to counteract them?
Ya.Z.: The biggest problem with FTX was the lack of proper regulation, which allowed the misuse of client funds for their own purposes. As a result, the exchange lost a lot of assets and eventually filed for bankruptcy.
But the problem of regulating the cryptocurrency market will not be long. Now, regulators in many jurisdictions have already introduced relevant legislation. For example, the EU recently agreed on MiCA, as well as the Transfer of Funds Regulation, which affects the transfer of funds between service providers.
Almost all regulatory regimes, in one way or another, answer the questions of leveling the risks that arise in activities related to digital assets.
As for the AIFC, in 2018, the first rudiments of a regulatory regime regarding digital assets appeared. Now, both within the framework of the pilot project and within the framework of the future new regulatory regime, we take into account international practice and will try to prevent existing risks.
Interviewed by Lena Jess.
Read Cryplogger bitcoin news in our Telegram – Cryptocurrency news, courses and analytics.
Found a mistake in the text? Select it and press CTRL+ENTER
Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
In the spring of 2018, the Astana International Financial Center (AIFC) developed and approved the Concept for Regulation of the Virtual Currency Market and Private Placement of Securities. Four years later, a pilot project was launched on the basis of the center with the participation of bitcoin exchanges and banks, which received the right to legally conduct cryptocurrency transactions.
Kazakhstan plans to become a regional cryptohub, but for this the country will have to improve the regulation of the industry and mitigate risks against the backdrop of a decrease in market capitalization and a series of bankruptcies of large international companies.
Cryplogger spoke with Yagub Zamanov, Director of the Financial Technology Department of the AIFC Committee on Financial Services Regulation, about new regulations for bitcoin exchanges, the development of local startups and the collapse of FTX.
Cryplogger (FL): Hello Yagub. In April, the financial regulator of Kazakhstan announced the initiative on the creation and development of exchanges based on the AIFC. How many crypto-related companies have received the center’s license so far?
Yagub Zamanov (Ya.Z.): To date, we already have nine licensed providers. Most of them are cryptocurrency exchanges: ATAIX, Biteeu Eurasia (Intebix), Binance, CaspianEx (Top Line), Upbit, Xignal&MT and Eurasia Blockchain eXchange; crypto broker QuantDART FinTech Limited, as well as tokenized securities exchange Bitfinex Securities.
As far as miners are concerned, they do not fall within the scope of our regulation.
Many jurisdictions associate the AIFC only with crypto exchanges, but we also issue licenses to other market participants that work with digital assets. Our task is to create a regulatory regime that takes into account the interests of all players.
FL: Some of the trading platforms you mentioned are taking part in a pilot project for interaction with commercial banks. What is it?
Ya.Z.: Exchanges have access to second tier banks (STB) and can now open bank accounts, accept fiat currencies from clients, exchange them for digital assets and vice versa.
The project involves crypto exchanges ATAIX, Intebix, Binance and five banks: Halyk, Freedom, Altyn, Evraziysky and Nurbank.
The Intebix exchange together with the Eurasian Bank have already announced plans to issue a crypto card. It could be quite an interesting product for the market.
In general, the pilot project is successfully operating under the strict control of the working group, which includes representatives of the AIFC, the National Bank of Kazakhstan, ICRIAP, ARRFR And AFM. At the end of 2022, we will sum up the results of this interaction in more detail.
FL: It turns out that any citizen of Kazakhstan can get access to crypto exchanges? Are there limits on the amount of investments?
Ya.Z.: As part of the pilot, we distinguish between retail and professional investors. Retailers, in turn, are divided into qualified and unskilled.
The first, as a rule, are novice investors in digital assets. They have a monthly limit of $1,000, which is $12,000 per year. An unqualified retail investor is only allowed to deposit assets up to this limit.
To become a qualified retail investor, it is enough to pass the test on the website of the crypto-exchange, show the necessary experience, knowledge and back it up with some kind of certificates. Limits no longer apply to such investors.
We classify licensed crypto market players as professional investors, for example, brokers.
FL: Are bitcoin terminals installed in the AIFC?
Ya.Z.: There are no such terminals on the territory of the AIFC. But I do not rule out that at some stage of market development they will appear in our country.
FL: The AIFC offers tax incentives to its members. To whom do they apply?
Ya.Z.: Licensed market participants until 2066 are exempt from paying progressive income tax. This was approved by a joint act between the AIFC and the Ministry of Finance of Kazakhstan.
Benefits do not apply to ordinary companies registered on the territory of the center as a legal entity. In this case, a license is required.
FL: What other benefits do residents of the center have?
Ya.Z.: The AIFC has legislation based on the principles of common law. It is quite extensive and covers most of the questions that digital asset service providers may have. In addition to this, we have an AIFC court capable of using case law in its activities.
In addition, licensed participants form a community with other market players. Crypto exchanges can keep in touch with each other and act as a united front on issues of interest to them.
FL: Have you noticed interest from traditional financial institutions in cryptocurrencies?
Ya.Z.: Operations with digital assets is a new field of activity both for STBs and for the country as a whole. Even judging by the pilot project, there are more participating banks than crypto exchanges. This way they can gain knowledge from cryptocurrency holders and have access to new technologies.
In the future, after the successful completion of the pilot, we hope to see the interest of other representatives of the traditional financial market.
FL: How much has the activity of citizens of Kazakhstan increased in the issue of buying cryptocurrencies?
Ya.Z.: Specific figures can be given after summing up the results of the project. But even if the AIFC is excluded from this formula, there has always been interest in cryptocurrencies in Kazakhstan. Especially it has grown in the wake of the popularity of mining.
I am sure that the ability to use their bank accounts for the official purchase of cryptocurrencies is a pretty good option for citizens who actively use the services of exchanges.
FL: Has the number of blockchain startups increased in the country?
Ya.Z.: If we take the blockchain technology itself, then there can be an absolute multitude of projects and not necessarily related to financial services. Their teams tend to be very progressive and offer innovative products. Interest in the development of this area has always been at a high level.
Bitcoin appeared after the 2008 crisis, at a difficult time for the traditional finance market. Therefore, many pinned their hopes on cryptocurrency as a replacement for money, greater decentralization, transparent transactions in the absence of intermediaries and control. But as a result, this did not happen, and now bitcoin is perceived more as an investment tool than as a settlement tool.
Perhaps the current crisis in the crypto markets will affect the number of specialized startups, but I think that this will be more filtering than the death of the entire industry.
FL: What do you see as the main benefit of the development of the crypto market for the economy of Kazakhstan?
Ya.Z.: First of all, these are new technologies, which, with the arrival of big players and the development of local startups, finally fall into everyday use.
Second, there are jobs. Promising young people who believe in the idea of digital assets now have the opportunity to work for crypto exchanges, big players, local and foreign startups. This is a matter of employment.
Thirdly, despite the existing benefits, the budget still receives income taxes from employees of cryptocurrency companies.
And, of course, STBs, in partnership with bitcoin exchanges, exchange experience and gain new competencies.
I am convinced that in the future we will see other advantages from the digital asset industry.
FL: Does Kazakhstan benefit from large players entering the market? Perhaps the AIFC has already received new applications for a license from well-known crypto projects?
Ya.Z.: Kazakhstan always wins when big names appear in the jurisdiction. The arrival of a large investor automatically multiplies all the positive effects listed above. Attracting investments is exactly what the AIFC was created for.
At the same time, the center provides an opportunity for Kazakh startups to develop and evolve into large companies. It also gives a boost to the entire industry.
I cannot yet announce information about new applications for licenses, I will only note that there is interest in the jurisdiction.
FL: Before the launch of the AIFC pilot project, the Ministry of Digital Development of Kazakhstan indicated that it sees its goal as “development of the country’s potential as a regional cryptohub”. At what stage is this work now?
Ya.Z.: In order to become a regional cryptohub, it is necessary to carry out certain work, first of all, to create favorable regulatory conditions. If they are, then the interest of large investors in the jurisdiction will also appear. Just saying it won’t happen.
FL: Speaking of regulation, what fresh initiatives is the AIFC preparing regarding the crypto asset market?
Ya.Z.: Since 2018, the center has continued to strengthen the legal regime and we are currently working on a rulebook for digital asset platforms. This is a centralized set of rules for crypto exchanges.
We will consult with the market to further improve these rules.
At the moment, we have approved the Policy Paper – a document that prescribes the main approaches and principles for the provision of financial services by crypto exchanges based on the AIFC.
In the next week or two, we will present it on the website for public consultations with the possibility of making comments.
FL: The previous months on the crypto market were marked by major bankruptcieshappened collapse of the FTX exchange. Against this background, what are the main risks in the industry that the AIFC identifies and how does it plan to counteract them?
Ya.Z.: The biggest problem with FTX was the lack of proper regulation, which allowed the misuse of client funds for their own purposes. As a result, the exchange lost a lot of assets and eventually filed for bankruptcy.
But the problem of regulating the cryptocurrency market will not be long. Now, regulators in many jurisdictions have already introduced relevant legislation. For example, the EU recently agreed on MiCA, as well as the Transfer of Funds Regulation, which affects the transfer of funds between service providers.
Almost all regulatory regimes, in one way or another, answer the questions of leveling the risks that arise in activities related to digital assets.
As for the AIFC, in 2018, the first rudiments of a regulatory regime regarding digital assets appeared. Now, both within the framework of the pilot project and within the framework of the future new regulatory regime, we take into account international practice and will try to prevent existing risks.
Interviewed by Lena Jess.
Read Cryplogger bitcoin news in our Telegram – Cryptocurrency news, courses and analytics.
Found a mistake in the text? Select it and press CTRL+ENTER
Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
