As governments around the world wrestle with the crypto industry, Kazakhstan has become one of the first to attempt a forced centralisation of cryptocurrencies.
The Kazakh Association of Blockchain and Data Center Industries – an industry-body for crypto miners – revealed that active crypto exchanges registered in the country will soon be required to start working with local banks to facilitate Kazakh customer’s access to cryptocurrencies, namely Bitcoin (BTC).
The Astana International Financial Center (AIFC) – a regulator that licences crypto exchanges operating within Kazakhstan – has already launched a pilot project with banks to explore implementation, as reported the Astana Times.
Cryptocurrency and other digital assets are currently illegal for use in Kazakhstan.
Under the proposed scheme, access to crypto exchanges will require legal ownership of a centralised and AIFC registered crypto bank account (bank held wallet). From this account, the crypto user will be able to conduct transfers, buy-and-sell cryptocurrency and carry out various operations with it on the exchange market.
New bank accounts will also be capable of receiving fiat currency if it’s tied to an income source, with the bank acting as a centralised intermediary for all transactions.
This can be seen as a regressive step, with banks moving back into a third-party verification role being the antithesis to the original Satoshi White Paper, and completely bypassing Bitcoin’s double-spending problem solution.
For the Kazakh Association of Blockchain and Data Center Industries (KABDCI), it is clear the move is about the continuation of centralised monetary control in Kazakhstan, and demonstrates that the Kazakh government sees cryptocurrencies and digital assets as little more than a cash-cow.
“The global premise is that crypto turnover is billions of dollars of daily turnover around the world,” said Sergey Putra, KABDCI’s government relations coordinator.
“And even if Kazakhstan takes a fraction of a percent, even one percent of this turnover, this is serious money that will come to Kazakhstan in the form of investments and that will remain here in the form of taxes, jobs and salaries.
“This is a very large industry, which Kazakhstan is still bypassing.”
This comes as swathes of Chinese crypto miners have moved to the nation following the Chinese mining crack down.
Bitcoin mining in China now accounts for less than 30% of the global share. A seismic change – at the start of the year this was closer to 60%.
Kazakhstan’s crypto mining industry has consequently boomed to become the third-largest producer of cryptocurrency in the world, accounting for up to 10% of global BTC mining.
The pilot project is expected to last one year, and while circulation of digital currency in Kazakhstan is currently prohibited, market experts expect that the ban on cryptocurrency will be scrapped after the completion of the pilot project.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.