Kazakhstan's National Bank Explores Crypto Inclusion in Reserves

The National Bank of Kazakhstan (NBK) is actively exploring the potential benefits of incorporating alternative assets into the country's economic strategy. This move is part of a broader trend of increasing crypto adoption in Kazakhstan, which has been involved in cryptocurrency mining for several years and has recently announced plans for a "CryptoCity."

According to a press release, NBK is considering the inclusion of digital assets in its sovereign and foreign currency reserves. The governor of the bank, Timur Suleimenov, highlighted the experiences of other countries during a press conference. He mentioned that countries like Norway, the United States, and several Middle Eastern nations have investments in crypto assets, either directly or through ETFs and shares of companies related to cryptocurrencies. Suleimenov emphasized that while these assets can offer high returns, they are also characterized by high volatility, requiring a cautious approach.

In addition to exploring the inclusion of digital assets in its reserves, Kazakhstan is planning to establish a state-mandated fund for crypto assets seized by law enforcement. This fund could also include assets obtained from legal mining operations. Furthermore, the country intends to restrict cryptocurrency trading to exchanges authorized by the Astana International Financial Centre (AIFC).

Kazakhstan's involvement in cryptocurrency mining dates back to 2017, when the activity was encouraged despite cryptocurrency not being legal tender. President Kassym-Jomart Tokayev addressed the nation in 2020, aiming to attract $1.2 billion for infrastructure within five years to stay competitive with neighboring countries. By the summer of 2021, Kazakhstan had become the second-largest country in the world for hash rate, a measure of computational power dedicated to mining.

More recently, the country announced plans for a "CryptoCity" in the small city of Alatau in the Almaty Region. This venture aims to create a crypto-friendly environment where digital assets are used exclusively as payment methods. Despite these advancements, Kazakhstan still lags behind in retail adoption compared to its global rivals. According to the 2024 Global Crypto Adoption Index, the country ranks 57th out of 151 countries included in the report, indicating relatively low volumes of transactions and engagement in various blockchain protocols.

This bold plan by Kazakhstan to include crypto in its state reserves reflects the country's growing interest in digital assets. While the potential for high returns is enticing, the volatility of crypto assets necessitates a cautious approach. The establishment of a state-mandated fund for seized crypto assets and the restriction of trading to authorized exchanges further demonstrate Kazakhstan's commitment to integrating cryptocurrencies into its economic framework. However, the relatively low retail adoption suggests that there is still significant room for growth in the country's crypto ecosystem.