Kazakhstan unveils ‘crypto card’ payments initiative

The National Bank of Kazakhstan has launched a ‘crypto card’ retail payments initiative this week among a new set of projects aimed at encouraging the growth of regulated digital finance.

State authorities in the world’s largest landlocked country, which has a population of about 20 million, have been undertaking a growing number of explorations and investments into all sorts of fintech-related programmes in recent years, including the development of a central bank digital currency (CBDC).

Through the crypto card initiative, consumers can link licensed cryptocurrency wallets to traditional payment cards and then make retail payments in crypto – with merchants continuing to receive ‘normal’ fiat currency (Kazakhstan’s national currency is the tenge). The initiative ‘provides the ability to securely and conveniently integrate the turnover of digital assets into the existing payment infrastructure,’ the National Bank of Kazakhstan states in an announcement.

The scheme was formally launched today (3 June) in capital city Almaty ‘as part of the execution of the instructions of the head of state [president Kassym-Jomart Tokayev] on the development of the digital asset industry,’ the central bank said.

A gathering involving representatives of banks, crypto exchanges and fintech companies also discussed the implementation of further projects ‘to launch innovative financial services based on tokenisation and digital assets’; and ‘the issues of integration of digital assets into the country’s financial system and the further development of relevant regulation.’

RELATED ARTICLE Kazakhstan tests central bank digital currency use in public procurement – a news story (26 March 2024) on authorities stepping up their use of the country’s nascent central bank digital currency (CBDC) four months after the CBDC’s technology platform was ‘put into operation’ during an event marketed as the launch of the digital tenge

Stablecoins and tokenised finance

The central bank’s announcement explains that the ‘crypto card mechanism provides for the sale of the client’s [person’s] digital assets on the AIFC [Astana International Financial Centre] crypto market at the time of the payment transaction with the instant crediting of their value to the “crypto card” (a standard payment card linked to the person’s bank account).’

Payment will take place ‘using real money after the immediate sale of crypto assets,’ its explanation continues, adding that ‘instant settlement will be ensured through the crypto-fiat integration of the bank and the AIFC crypto provider.’

The announcement goes on to reference further pilot projects that companies, ‘under the coordination of the National Bank’, also plan to implement.

These include the issuance of stablecoins backed by the national currency (including the digital tenge) ‘for settlement transactions with digital assets’ (stablecoins are cryptocurrencies designed to maintain a stable value by having their market value pegged to an external reference, typically fiat currency); and tokenisation of ‘financial assets’, real estate (investments) and ‘the issuance of tokens equated to securities.’

The former Soviet nation previously developed a reputation as a popular location for the energy-intensive process of Bitcoin ‘mining’ (mining of Bitcoin – the world’s best-known cryptocurrency – is the process of adding new groups of transactions, known as blocks, to the shared transaction record – the blockchain). But most Bitcoin mining activity left the country after a government crackdown on illegal crypto mines, among other factors. 

RELATED ARTICLE Kazakhstan CBDC platform ‘put into operation’ in contactless transaction demo – a news story (27 November 2023) on a transaction using contactless card technology being demoed during an event marketed as the launch of digital tenge

Sandbox experimentation

The launch of crypto cards was hailed by National Bank of Kazakhstan chief digital officer Binur Zhalenov in a LinkedIn post.

‘Merchants receive tenge, while users get a seamless payment experience with digital assets — no new infrastructure required,’ Zhalenov wrote.

He went on to state that the planned pilots for tenge-backed stablecoins, tokenisation of real estate and other assets, and further plans, were to be run though the central bank’s regulatory sandbox (test space).

His post also mentioned ‘web3 infrastructure and DAO experiments’ and ‘scalable fiat-crypto gateways across the country’ (web3 is a term used to describe the ‘next iteration’ of the internet, built on blockchain technology; and DAO stands for ‘distributed autonomous organisation’ – an emerging type of organisational structure reliant on blockchain).

‘These initiatives reflect our ambition to create a safe, inclusive and forward-looking digital finance ecosystem, aligned with the best international practices and tailored to Kazakhstan’s needs,’ Zhalenov added.