The AIFC Financial Services Authority (AFSA) is in the process of authorizing a license to Binance, the largest cryptocurrency exchange. A Memorandum of Cooperation was signed between the Crypto Exchange and the Ministry of Digital Development, Innovation, and Aerospace Industry. This will aid in the ongoing growth of Kazakhstan’s cryptosphere.
The cryptocurrency market isn’t having the best of times: while bitcoin was valued at 44,000 USD in March, it is now worth only 31,000 USD. However, history may repeat itself: Bitcoin already fell to 29,000 USD in the spring of 2021, and in November it reached its record high of 69,000 USD. Despite the fact that cryptocurrency is a risky asset due to its extreme volatility, experts anticipate a new rise in bitcoin. In general, interest in cryptocurrency remains high.
FinReview.info analysts investigated how Kazakhstan’s crypto business is evolving and what new conditions are being developed for crypto exchanges.
Cryptocurrency is the fastest growing segment of the financial market
At the moment, the crypto market is valued at 1.2 trillion USD, with Bitcoin being the most valuable cryptocurrency at 31 thousand USD per coin.
The fast-growing, albeit volatile, cryptocurrency industry is gradually gaining the attention of not only traders and enthusiasts, but also financial regulators and governments.
While some countries refuse to accept or acknowledge cryptocurrencies, others are exploring ways to incorporate digital assets into an existing financial system.
Kazakhstan overtook Russian miners to take second place in cryptocurrency output in 2021, standing behind only the United States. Our country’s portion of the global hash rate has climbed to 18%. Such high results suggest that the country can and should invest in the cryptosphere and profit from the “new dollar,” as analysts refer to cryptocurrency.
Even though the country is one of the leaders in mining, the market for digital asset turnover has stalled. As a result, Kazakhstanis and mining corporations frequently trade cryptocurrencies on sites registered in foreign jurisdictions or on local platforms that lack a financial regulator license. Investing on unregistered exchanges exposes investors to capital loss.
In November 2021, the President met with financial market representatives and discussed a new development vector in the sphere of financial system digitalization. Then, among other topics, the Head of State brought up the situation of cryptocurrencies and financial innovations for debate.
“Cryptocurrencies are an objective factor that cannot simply be ignored. It is necessary to clearly assess the risks and the potential for their impact on the current financial system. Therefore, it is necessary to resume work on the formation of balanced regulatory conditions for the creation of crypto-exchanges in our country,” Tokayev said.
The implementation of authorized crypto-exchange activities on our country’s territory is only possible in the Astana International Financial Centre. The AIFC is a one-of-a-kind platform that brings together reputable participants in the cryptocurrency market. The AFSA was the first to establish a regulatory framework for the creation of digital assets. Acts regulating the following were passed in July 2018:
1) the functioning of platforms (crypto-exchanges) for the circulation and exchange of unsecured digital assets in the AIFC;
2) activities of AIFC authorized participants in the storage and administration of unsecured digital assets; and,
3) activities of AIFC authorized participants in providing investment services in the field of unsecured digital assets.
The first licenses for crypto exchanges began to be issued back in 2019. However, for a long time, crypto exchanges did not have access to commercial banks in Kazakhstan. To solve this problem and contribute to the further development of digital assets, in October 2021, a Roadmap for the development of the crypto industry and blockchain technologies in the Republic of Kazakhstan was approved. As part of this roadmap, a pilot project for the interaction of crypto exchanges licensed in the AIFC is expected to be launched with the country’s commercial banks.
Binance, the world’s largest cryptocurrency exchange, will operate in Kazakhstan
The availability of a regulatory regime for cryptocurrency exchanges in Kazakhstan attracts the interest of the top players in the crypto market seeking to work in the legal field.
Consequently, after continued conversations with numerous government agencies and organizations, Changpeng Zhao, the founder and CEO of the Binance crypto exchange, came to Kazakhstan on May 25, 2022. As a result of the meeting, the Ministry of Digital Development, Innovation, and Aerospace Industry and Binance inked a Memorandum of Cooperation. The parties discussed and detailed the opportunities for long-term cooperation between Kazakhstan and Binance in the sphere of digital finance, the execution of cooperative educational programs in the field of blockchain technology, and the establishment of a regional crypto industry hub in the country.
Despite the fact that the Memorandum was only signed in May this year, agreements with the world’s biggest blockchain ecosystem began in October 2021, when Binance was registered as a participant of the AIFC.
Now, the crypto exchange is going through the AFSA authorization process to secure a license to administer a digital asset platform, or a crypto exchange.
“One of our new goals is to ensure the widening acceptance of cryptocurrencies, which will have a good impact on society as a whole. We believe that by working closely with local authorities, Binance can make a significant contribution to the development of Kazakhstan’s crypto community and blockchain ecosystem,” Changpeng Zhao says.