Kazakhstan Tightens Crypto Controls, Closes 36 Unregulated Exchanges

Kazakhstan has transitioned from being a haven for crypto mining to a state with stringent controls over cryptocurrency activities. The government encourages innovation while insisting on strict regulation, requiring compliance with anti-money laundering (AML), tax, and licensing rules. Non-compliance can result in significant legal risks.

The primary authorities overseeing crypto activities in Kazakhstan include the National Bank of Kazakhstan (NBK), the Astana Financial Services Authority (AFSA) within the Astana International Financial Centre (AIFC), the Ministry of Digital Development, Innovation and Aerospace Industry (MDDIAI), and the Financial Monitoring Agency (FMA).

Historically, Kazakhstan was initially indifferent to cryptocurrency. In 2019, several large mining farms moved to the country to take advantage of low-cost electricity, making Kazakhstan the world leader in Bitcoin mining power in 2021. However, this changed in 2021 due to power shortages and the emergence of unregistered mining operations. In response, the government introduced a mining electricity tax in 2022 and a new law in 2023 that legalized mining but required companies to obtain licenses and conduct trading through the AIFC. By 2024, the government had closed 36 unregulated crypto exchanges and confiscated 4,000 mining devices, indicating a shift towards a more controlled and regulated system.

The regulatory framework in Kazakhstan is overseen by several key authorities. The NBK issues policies and pilots the digital tenge, while the AFSA regulates exchange custody within the AIFC. The FMA applies AML/CFT regulations, and the MDDIAI determines the digital-development strategy. Crypto miners, pools, and service providers must obtain licenses from the NBK or AFSA, with 84 mining licenses and five pools accredited by 2023. Exchanges are required to verify customers, report suspicious activities, and maintain records under the 2009 AML Law. A draft dated May 2025 proposes to impose these obligations on stablecoin issuers and OTC desks.

In Kazakhstan, mining incomes are taxed at a rate of 15% corporate income tax and a power tax that varies based on electricity consumption. Beginning in 2025, sellers must sell 75% of their mined coins at exchanges registered in the AIFC. Individual profits from selling crypto are subject to the nation's normal income taxes. Utility tokens are considered unsecured digital assets and must be registered through a white paper, while security tokens are governed by securities laws and must comply with AFSA rules for issuing a prospectus.

Kazakhstan's crypto policies allow the use of crypto for payments within testing zones, such as the proposed CryptoCity sandbox in Alatau. Beyond these areas, crypto does not constitute legal tender. Mining is promoted but must adhere to strict guidelines, including obtaining a license and adhering to a power-sharing structure where 70% of the energy is channeled to the national grid and 30% is used for mining. This arrangement has attracted foreign investors to revamp old power plants. The government's largest crypto projects include the digital tenge, set to fully launch by the end of 2025, and a new crypto bank that will introduce legal crypto trading and secure storage of digital assets. Non-compliance with licensing and tax requirements can result in severe penalties, including the seizure of mining equipment, freezing of assets, and imposing huge fines.

Kazakhstan has two centers of innovation: the AIFC regulatory sandbox, which has provided start-ups with temporary exemptions to experiment with crypto wallets, money transfer applications, and tokenized asset platforms since 2018, and the future CryptoCity, which will focus on daily crypto payments. Crypto debit cards are being tested by major banks, and some supermarkets in Nur-Sultan and Almaty already accept test payments made in the digital tenge. Government-sponsored tech parks are financing blockchain projects, such as monitoring uranium on the supply chain and computerizing land records, demonstrating the government's endorsement of practical, transparent applications of blockchain technology.

Despite these advancements, challenges remain. Regulation outside the AIFC is unclear and inconsistent, with about 90% of crypto trading conducted on offshore or peer-to-peer platforms. The issue of power shortages, particularly during peak seasons, is a subject of societal debate, as miners are credited with job creation but also accused of causing blackouts. The adoption of crypto is hindered by public wariness due to scam stories and regional differences in attitudes towards mining.

Looking ahead, new regulations are likely to introduce a requirement for every digital asset provider in Kazakhstan to obtain a single national license. Stablecoins will require an audit of reserves, and the NBK will operate a special digital-asset reserve for seized crypto. The proposed legislation will also enable crypto teller machines nationwide and extend VAT legislation to digital-asset payments. The next two years promise more stringent ID verification, encouragement for companies to adopt the digital tenge, and the extension of the CryptoCity template to other tech scenes. This "regulated, but open" model may influence neighboring states, contributing to the establishment of a crypto corridor in Central Asia that encourages legal mining companies and fintech enterprises while excluding illicit activity.

Kazakhstan is striving to balance innovation with strict regulations. The crypto policy is built on three pillars: legal mining, payment testing in sandboxes, and full licensing of all participants. Compliance with licensing, tax, and AML regulations is mandatory for investors, exchanges, and miners. The upcoming legislation concerning stablecoins, crypto ATMs, and safe storage will alter the way businesses operate, making it crucial for companies to stay informed and compliant in this well-regulated environment.