Kazakhstan's crypto future: AIFC and QazPost collaboration to transform digital asset transactions

Which cryptocurrencies are planned to be supported as part of the new project with QazPost?

It will be digital assets listed in the Table of Digital Assets approved by the Astana Financial Service Authority (AFSA) to trading on the Digital Asset Trading Facilities licensed in Astana International Financial Centre (AIFC). The full list may be found in a Table of Digital Assets. They include well-established digital assets such as Bitcoin (BTC), Ethereum (ETH), USDT (Tether), Toncoin (TON). It is worth noting that QazPost would not provide services with digital assets, rather it would be a fiat gateway for licenced firms in the AIFC.

What security measures will be introduced to protect customers from fraud and speculation in the digital asset market?

While QazPost will serve as a fiat gateway in the digital asset ecosystem, the primary responsibility for ensuring security and protecting customers from fraud and speculation will remain with the digital asset service providers. Digital asset service providers use advanced security protocols, including robust encryption methods to protect customer data and transaction information, and two-factor authentication (2FA) for securing user accounts. They will also enforce strict Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures to verify customer identities and monitor transactions for suspicious activities, alongside real-time monitoring to detect and prevent fraud.

These security measures will be supplemented by QazPost’s handling of fiat deposits and withdrawals, facilitating the conversion of fiat currency to digital assets and vice versa, ensuring smooth fund transfers between traditional banking systems and digital asset platforms. We must note here again that QazPost is not a digital asset service provider and acts as part of wider fiat infrastructure in the AIFC.

How does the inclusion of QazPost in the Rules of Cooperation contribute to the creation of a global cryptohub based on the AIFC? What additional initiatives or projects are planned to achieve this goal? Are there any plans to create your own cryptocurrency exchange?

The inclusion of QazPost in the Rules of Cooperation definitely contributes to the creation of a global cryptohub based in the AIFC. QazPost’s network provides accessibility for individuals and businesses to enter the digital asset market by having more points where they can deposit or withdraw fiat money. Additionally, utilising QazPost’s infrastructure facilitates fiat-to-crypto transactions.

However, apart from the initiative to include QazPost, to support regulatory innovation in the digital assets industry, in March this year AFSA issued a notice. This notice sets out AFSA’s expected approach regarding the provision by the AIFC Digital Asset Service Provider (“DASP”) of new digital asset products and services within the environment of AFSA’s FinTech Lab. This approach is an additional initiative aimed at fostering innovation and supporting the development of new digital asset products and services.

Regarding the creation of a crypto exchange, AFSA is a regulator and cannot create its own crypto exchange. AFSA is responsible for overseeing and regulating the digital asset market, ensuring compliance and security, but it is not within its mandate or capabilities to establish and operate a crypto exchange.

What impact is expected on AIFC digital asset trading volume with the inclusion of QazPost as a fiat channel?

With the inclusion of QazPost in the Rules of Cooperation, AIFC digital asset service providers and investors will have more choices for fiat channels, enabling individuals and businesses to participate more widely in the digital asset market. Additionally, having more players offering fiat channels will further promote healthy competition.

What other financial innovations and projects are being developed in the AIFC to support the digital asset market?

AFSA operates a regulatory sandbox designed to provide a controlled and supportive environment for fintech startups to test and develop their innovative products and services. This sandbox is crucial for fostering innovation within the financial sector, particularly for digital asset service providers. This allows for innovation while ensuring that risks are managed.

Startups can test their products with real customers under the supervision of regulators. AFSA provides guidance to startups on regulatory requirements, helping them navigate the complex regulatory landscape. This support includes assistance in understanding legal frameworks.

Please also refer to AFSA’s notice that allows Digital Asset Service Providers to test various digital assets product services (margin trading, derivatives trading, NFT trading, P2P, staking etc.) in the FinTech Lab environment.

What advantages and opportunities open up for clients and businesses due to the inclusion of QazPost in the Rules of Cooperation?

The inclusion of QazPost in the Rules of Cooperation brings numerous benefits and opportunities. It enhances accessibility, with QazPost’s extensive network across Kazakhstan, including remote areas, allowing more clients to access digital asset services by utilising QazPost’s infrastructure. This partnership also broadens fiat channel options for AIFC digital asset service providers.

How does the AIFC plan to support the growth and development of the digital asset market in Kazakhstan?

The work experience of AFSA, as well as the experience gained during the implementation of the Pilot Project, was used to develop and approve the following AIFC Acts:

· AIFC Rules on Digital Asset Activities (regulation of activities of digital asset exchanges, crypto brokers, investment managers, and other providers) (effective from January 1, 2024);

· AIFC Rules on the Interaction of Digital Asset Service Providers with Commercial Banks of Kazakhstan (effective from January 1, 2024);

· Regulatory Regime for the Issuance of Stablecoins (regulation of the procedure for issuing digital assets pegged to fiat currencies) (effective from January 1, 2024);

· Regulatory Regime for the Issuance of Tokenised Securities (regulation of the procedure for issuing securities using blockchain technologies) (effective from January 1, 2024);

· Guidelines for Over-the-Counter (OTC) Trading of Digital Assets (approved on March 29, 2024);

Thus, during the implementation of the Pilot Project from 2022 to 2023, a fundamental regulatory framework was created for the provision of financial services with digital assets. In addition, AFSA continues to work on supporting innovations in the field of digital assets, developing, and improving regulations. Currently, the AIFC Committee is implementing and planning the development of the following projects:

On 13 March 2024, AFSA set out its expected approach regarding the provision by the AIFC DASP of new digital asset products and services within the environment of the AFSA FinTech Lab. This approach outlines an initiative aimed at fostering innovation and supporting the development of new digital asset products and services, contributing significantly to the growth of the digital asset market in Kazakhstan.

Additionally, the AIFC plans to support this growth through its initiatives in regulatory sandbox which was described in more detail in response to question 6. These initiatives demonstrate the commitment of the AIFC to creating a thriving digital asset market in Kazakhstan, positioning the country as a leading hub for digital finance and innovation.

What further steps does the AIFC plan to take to strengthen Kazakhstan’s position as a leading center for digital finance and innovation?

To strengthen Kazakhstan’s position as a leading center for digital finance and innovation, AIFC plans to further develop its’ innovative financial services and products, also will focus on enhancing regulatory support through its regulator body - AFSA. Key steps include continuously updating, refining and adapting regulatory frameworks to emerging trends and technologies in the digital finance sector. This involves ensuring a transparent and supportive regulatory environment that encourages innovation while maintaining robust security and compliance standards.

AFSA will expand its FinTech Lab and regulatory sandbox to provide more opportunities for fintech startups to test and develop their products in a controlled environment. This initiative will allow startups to navigate the regulatory landscape effectively and foster innovation. Additionally, AFSA will offer ongoing regulatory support and guidance to digital asset service providers, conducting regular audits and compliance checks to ensure high standards of operation and security in the digital finance market.