More crypto restrictions needed: Why Kazakhstan is losing billions
Why Kazakhstan is losing ground in the crypto space
In the early days of cryptocurrency development, Kazakhstan was an important player in this market. However, strict regulation led to the crypto business leaving the country, while those who stayed are moving billions of dollars through other jurisdictions. The National Bank has chosen an unexpected solution to this problem – to strengthen control over the crypto sphere.
Recently, the National Bank of Kazakhstan announced that about $15 billion in crypto assets had been withdrawn from the country. The cause of the “leak” was cited as insufficient regulation of the industry, which prevents citizens from being able to “invest safely.”
According to the Deputy Chairman of the National Bank, Berik Sholpankulov, this money is already gone and cannot be recovered. However, the overall situation can be improved by tightening oversight of cryptocurrencies and introducing criminal and administrative liability for the illegal transfer of digital assets abroad.
“We are now talking about the development of the necessary approaches. The second part is criminal and administrative prosecution of people who are trying to illegally transfer cryptocurrency,” he noted.
In the near future, Kazakhstan plans to closely monitor cryptocurrency transactions. To this end, the country will connect to a specialized system that will allow it to track digital assets.
The influence of other countries
At the beginning of the year, President of Kazakhstan Kassym-Jomart Tokayev also stated that something needs to change in the country’s crypto industry. He emphasized that the cryptocurrency infrastructure is in urgent need of reform. According to the President, new technological trends dominate the world, and Kazakhstan must keep up with them.
Tokayev was particularly concerned that at the beginning of the year, U.S. President Donald Trump announced the creation of a Bitcoin reserve, while various large companies were actively investing in Bitcoin ETFs.
“A shift toward the widespread use of cryptocurrencies and other digital assets has begun to emerge in the financial sector. In such conditions, we must have a clear action strategy aimed at overcoming the serious challenges of the new era,” Tokayev stated.
What the authorities of Kazakhstan are planning
At present, the National Bank of Kazakhstan, together with the Agency for Regulation and Development of the Financial Market, is working to create a full-fledged digital financial ecosystem. This includes licensing crypto exchanges that will be able to officially exchange cryptocurrencies for fiat, as well as creating a regulatory framework for the circulation of digital financial assets (DFAs): stablecoins, tokenized bonds, and other instruments with real backing.
Licenses for crypto service providers will be issued under strict standards, and the list of permitted crypto assets will be approved by the regulator. The new admission system will require issuers and investors to adhere to transparency, strict risk management rules, and user data protection.
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The National Bank will oversee crypto exchanges, DFA platforms, and the circulation of stablecoins, while jointly with the Agency, they will monitor the collateral of DFAs and the protection of investors’ interests.
The current plans look extremely strange, as it was precisely due to strict regulation that Kazakhstan lost its leading position in the Bitcoin industry.
A turn in the wrong direction
Not long ago, Kazakhstan ranked among the top three global leaders in Bitcoin mining volumes, second only to the U.S. and China. After China’s 2021 ban on crypto mining, many mining companies moved to Kazakhstan due to relatively cheap electricity and favorable conditions. The country quickly became a major crypto hub, accounting for a significant share of the global Bitcoin hashrate.
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However, the situation changed when Kazakhstan’s authorities decided to impose strict control over the crypto industry. The Astana International Financial Center (AIFC) was established, where crypto companies were required to move for licensing and legal operations. Regulators set strict requirements for transparency, technical infrastructure, and reporting, which discouraged many market participants. Many companies, faced with bureaucratic barriers and restrictions, began to look for more flexible jurisdictions to conduct business.
As a result, Kazakhstan’s crypto market shrank significantly. Most companies either closed their operations or moved them to countries with more relaxed rules – such as the UAE, Hong Kong, or Singapore. Kazakhstan’s industry lost part of its capital, and significant amounts of crypto turnover began flowing through foreign platforms.
Is there a way out of this situation?
Let’s be honest – Kazakhstan is unlikely to regain its lost position in the crypto industry. The authorities chose the path of strict control, which has effectively destroyed the region’s attractiveness for business.
Instead of creating conditions for development and attracting capital, the government seems to favor coercive measures: criminal liability and various restrictions. As a result, many crypto companies have left for more business-friendly jurisdictions, while those who remain are seeking ways to move funds abroad.
The attempt to tighten regulation in hopes of restoring lost positions seems like a dead end. The country lost a unique window of opportunity after the influx of miners from China, and further tightening of the rules will only worsen the situation. Kazakhstan risks becoming a mere observer, rather than an active participant, in the crypto market.
