Crypto Regulations in Kazakhstan

In recent years, Kazakhstan has emerged as one of the worldwide leaders in total cryptocurrency operations per country. One of the causes of this rise was the governmental policy of incentivizing cryptocurrency miners to build operations in Kazakhstan. Due to these efforts, 6.17% of the world’s cryptocurrency is mined in Kazakhstan. Only three other counties produce more of the world’s cryptocurrency supply than Kazakhstan.

Source: Chambers

Yes, digital mining is legal in Kazakhstan. In July 2020, Kazakhstan legislation established a legal regime for mining and cryptocurrency. About 17 mining farms are already working officially in Kazakhstan.

Yes, as of the date of publication of this article, Kazakhstan legislation provides for the following business authorizations for digital mining activity:

• A company must obtain permission for the import encryption (cryptographic) equipment from the National Security Committee of the Republic of Kazakhstan;
• A company must notify the Ministry of Digital Development, Innovation and Aerospace Industry of the Republic of Kazakhstan about the planned activities (before design) for the construction of data centers (mining farms)

Kazakhstan legislation has neither rules governing operations with hash rates directly nor restrictions on this issue. Therefore, operations with hash rates are legal in Kazakhstan.

However, please note that Kazakhstan legislation characterizes cryptocurrency as a form of property, not a financial instrument or means of payment. The Kazakhstan law prohibits the issue and circulation of cryptocurrency in Kazakhstan.

Source: Gratanet

In July 2020, Kazakhstan officially recognized Bitcoin as a digital asset that could be accounted as any other commodity. The AIFC Fintech rules allow establishment of crypto exchanges and the building of other regulated activities based on digital assets.

Source: Mondaq

Kazakhstan has been taking significant strides toward regulating digital assets over the years. In a bid to protect consumers, the Central Asian country placed a prohibition on how much retail investors can bet on digital assets. 

A law passed last year allows citizens to invest 10% of their income in digital assets. Similarly, Kazakhstan also has strict KYC, AML, and CTF laws for digital currency firms. 

The country has also been directing regulations on the block reward mining industry. In February, Kazakhstan suggested raising taxes paid by block reward miners by 500%. The country also requires block reward miners to register and file periodical status reports on their operations. 

Source: Coingeek

Significant improvements in Kazakhstani regulatory regimes for mining and digital assets were achieved. As such, the legislation of the Republic of Kazakhstan established a legal regime for mining and cryptocurrency. To date, there are 17 mining farms that currently officially operate in the territory of Kazakhstan. 

At present, the Ministry of Digital Development, Innovation and Aerospace Industry of the Republic of Kazakhstan together with the AIFC and the Kazakhstan Association of Blockchain and Data Center Industry are in the stage of drafting the blockchain technologies and crypto industry regulations that would allow to achieve the smooth operation of crypto exchanges in the AIFC territory.

In addition, due to the increased demand from mining companies, in 2021, certain amendments to the Tax Code were presented with the introduction of a tax for digital mining in the amount of 1 tenge (0.00232 USD) per 1 kW/h from January 1, 2022. This legislative decision should not be interpreted as an obstacle for the new miner’s migration to Kazakhstan, but rather as another step toward the legalization of crypto mining and data centers (mining farms), which is considered as a necessary measure taking into consideration the restrictive control over miners around the world.

Source: Mondaq

The adopted amendments to the Tax Code complement Chapter 69 of the Code with a new type of payment – digital mining fee, which will come into force as from 1 January 2022. 

The tax on digital mining will be charged for the volume of energy consumed in the course of digital mining. The tax rate is set at KZT 1 (approximately 0.0023$) for 1 kilowatt-hour of energy consumed. 

Entities engaged in digital mining will be payers of the tax. Interestingly, one of the most common activities in the area of digital assets is the provision of a mining infrastructure (and not the digital mining itself), which is not subject to the new tax.

Source: PWC

.The president of Kazakhstan, Kassym-Jomart Tokayev, called for a higher tax on crypto mining just weeks after a new levy on the industry came into effect, local news sites reported on Tuesday.

• The current rate of 1 Kazakh tenge (US$0.0023) per kilowatt of power is negligible, Tokayev said, instructing the government to increase the tax as soon as possible and to come up with a full proposal for crypto mining regulation by April 1. The tax came into effect on Jan. 1.
• The new rate could be as high as 5 tenges per kWh, and miners might have to pay import taxes on their equipment, First Vice Minister of Finance Marat Sultangaziyev said, according to local media reports.
• Crypto mining doesn’t create many jobs and consumes high amounts of electricity, and some miners pay less for electricity than the public, the president said in a government meeting today. They also aren’t taxed on imported equipment.
• Crypto miners flocked to Kazakhstan after China cracked down on the industry in 2021. The central Asian country once had an electricity surplus, but since the influx, the national grid has been struggling to meet demand.
• The national grid operator cut off power to all mines on Jan. 21. The measure was supposed to last until the end of January, but miners told CoinDesk the electricity has yet to be restored.
• The government is also trying to stamp out “gray mining,” meaning operations that are not properly registered and licensed.
• The president tasked the Financial Monitoring Agency to identify all mining firms and check their tax and customs records by March 19.

Source: Coindesk

The Kazakhstan Association of Blockchain and Data Center Industry informed that crypto exchanges registered in the AIFC might shortly start operating with local banks which would allow their clients to openly and officially work with cryptocurrency. Such an opportunity is planned to be realized after the launch of the pilot project of the AIFC with second-tier banks.

According to the intended outline, in order to get on the crypto exchange, an investor is required to be the legal account owner in one of the banks registered with the AIFC. From this account, the entrepreneur will have the opportunity to buy a cryptocurrency, transfer money, and carry out various operations with it on the exchange market. 

The AIFC pilot project is estimated to last for one year for the purposes of the Kazakhstani government to assess and evaluate the benefits and risks of digital assets. Although the circulation of digital currency in Kazakhstan is currently prohibited, it is projected that the ban on cryptocurrency in Kazakhstan might become less categorical or might even be canceled after the successful completion of the pilot project.

Source: Mondaq

In addition to its swift advances toward regulating crypto mining, Kazakhstan will launch a pilot project for crypto exchanges in the special economic zone of the Astana International Finance Centre. 

The Ministry of Digital Development, Innovations, and Aerospace Industry of the Kazakhstan Republic announced on Thursday a pilot project of cooperation between the crypto exchanges and some of the local banks.

The working group formulated the guidelines for that cooperation, consisting of the representatives of the Ministry of Digital Development, the National Bank, the Financial Monitoring Agency, the Association of Financiers, Astana International Finance Centre, and the finance and crypto market stakeholders. 

The pilot project will be functioning until the end of 2022 and include the exchanges that have gained a license from the freshly-formed Astana Financial Service Authority (AFSA). It will make a blueprint for the subsequent development of Kazakhstan as a regional crypto hub. Close guidelines should soon be published on the AIFC webpage.

Source: Cointelegraph

In an effort to develop the Kazakhstan capital market, the Kazakhstan Government established the Astana International Financial Centre (the “AIFC”), which has a legal framework based on principles of English law, in common with similar financial centers around the world. The Astana International Exchange (the “AIX”) was formed as part of the AIFC and is an alternative listing venue to Kazakhstan’s Almaty-based stock exchange (the “KASE”).

In order to make an AIX listing beneficial for Kazakhstan issuers, certain exemptions were offered to those who opt to dual list securities abroad and on AIX. Under the general rule, Kazakhstan issuers offering their securities abroad (“Offshore Securities”) are required to:

(i) obtain prior authorization from the local regulator, currently, the Financial Market Supervision and Development Agency (the “FMSA”); and 

(ii) to list and offer 20% of any such securities on a domestic stock exchange. 

Source: Dechert

Regulations allowing crypto exchanges registered at the Astana International Financial Center (AIFC) to be serviced by second-tier banks in Kazakhstan have been adopted by a working group comprised of representatives of the Ministry of Digital Development, the central bank, financial regulators, as well as members of the financial and digital asset sectors, the ministry announced.

The initiative is part of a project aimed at introducing a regulatory framework that will facilitate the development of Kazakhstan’s potential as a regional crypto hub. It will be implemented as a pilot throughout 2022 with the participation of crypto trading platforms licensed by the AIFC Financial Services Authority (AFSA), a press release detailed.

Kazakhstan attracted cryptocurrency miners when China cracked down on the industry in May last year. According to Digital Development Minister Bagdat Musin, however, the crypto industry is not only mining but also includes crypto exchanges, digital wallets, and other blockchain platforms. The high-ranking government official elaborated.

Source: News Bitcoin

Kazakhstan is cracking down on unlawful crypto miners. The vitality authority reported it has traced and disconnected 13 crypto mining farms in nation. The crypto miners operated without correct authorization.

The consumption energy of these crypto miners reached 202 megawatts.

Kazakhstan President Kassym-Jomart Tokayev instructed the Monetary Company Monitoring to establish all crypto miners within the nation and report by 15 Match.

He added that the
 
“ crypto mining business within the nation will not be creating ‘mass jobs’ nor merchandise. Bitcoin miners obtain tariffs which are a lot decrease than the remainder of the inhabitants. Tax will not be paid on imported gear.”

Source: Trades-Academy

Kazakhstan has been experiencing severe power shortages since the fall of 2021, due partly to an influx of crypto miners from China and infrastructure deficiencies. Since the beginning of 2021, electricity demand in Kazakhstan has increased by about eight percent. That’s a significant increase over the one to two percent the country sees typically annually.

The government has decided to crack down on illegal mines to solve energy problems. In late February, the government announced that it had uncovered illegal crypto mines worth 202 megawatts. In total, the financial regulator has opened 25 criminal cases and seized 67,000 machines worth 100 billion Kazakh tenges ($193 million).

Source: Cryptonary

Kazakhstan, a crypto mining hotspot since last year, has been trying to limit operations in its crypto mining sector which expanded rapidly after China launched an offensive against the industry in May 2021. The government has been mostly going after illegal miners this year, although the energy-hungry industry as a whole has been blamed for electricity shortages and blackouts.

After recently closing down more than 100 crypto farms, including registered mining entities which, according to an official announcement, “voluntarily” halted their activities, law enforcement officials have conducted a raid on another facility minting digital currencies. The farm was set up in a room on the premises of the Kundyzdy railway station, 24 Khabar reported.

According to the country’s Transport Police Department, which carried out the search, the officers found 130 crypto mining units as well as hard drives and spare parts. The mining equipment has been seized and a pre-trial investigation has been launched, a high-ranking police official told the news outlet. Quoted by the department’s press service, he noted:

Other information in accordance with Article 201 of the Criminal Procedure Code of the Republic of Kazakhstan is not subject to disclosure.

Source: News Bitcoin

In the AIFC, as part of the development of fintech in Kazakhstan, three main tasks have been identified: to regulate the market of crypto-currencies, to create a regulatory ‘sandbox’ for the development, testing, and maintenance of new technologies in the financial sector and the creation of conditions for maintaining financial start-ups in Kazakhstan.

According to her, AIFC should become a single point for gathering innovative solutions, and new ideas around the world and a platform for cooperation between world companies in the development of financial technologies. For the stimulation of ideas and the development of new innovative solutions for Fintech, it is planned to create and launch a hub based on the AIFC with an accelerated program for profile start-ups.

Fintech-hub of the AIFC is aimed at studying and developing seven technological areas: next-generation payment systems, online lending (P2P platforms), blockchain and crypto-currency, security and biometric identification, Robo-advising, increasing financial accessibility, and artificial intelligence.

Source: PrimeMinister.kz