Faced With Bitcoin and Cryptocurrencies, Kazakhstan Opts for Pragmatism.
Kazakhstan's goal is to take advantage of this revolution rather than try to harm it.
In the top 10 largest countries in the world in terms of area, Kazakhstan is sitting on a treasure trove of natural resources: gas, oil, gold, titanium, cobalt, ... Counting on taking advantage of its natural wealth, Kazakhstan wants to become the new Eldorado of Bitcoin and cryptocurrencies.
While Binance has just obtained its license to operate on the territory of the Central Asian giant, all signals seem to be green in this area for Kazakhstan.
The Financial Services Authority of Astana, the Kazakh capital, granted Binance the status of a regulated platform in October 2022, which can now operate as a digital asset provider. This is an important step in the process of legitimizing cryptocurrencies in a country that was previously known by specialists as a land of mining, rather than of BTC exchanges or trading.
In just a few years, Kazakhstan has indeed established itself as one of the world's leaders in the Bitcoin mining industry, with no less than 24% of the Bitcoin network's Hash Rate, which positions the country in a fine second place behind the United States.
After China decided to ban Bitcoin mining in September 2021, a substantial part of Chinese miners turned to the “Kazakh paradise,” whose reputation for political stability and cheap electricity convinced the most skeptical.
It must be said that electricity is by far the main “raw material” that miners need for their activity to secure the Bitcoin network.
Aware of the potential of this new market, the Kazakh authorities have been working hard to promote the development of this promising sector. In early October 2022, Binance signed a new memorandum of understanding with the Kazakhstan Financial Supervision Agency to better coordinate efforts to fight financial crime.
More generally, Kazakh authorities have been developing increasingly industry-friendly regulations, such as allowing cryptocurrency exchanges to open bank accounts. Earlier, in September 2022, Kazakhstan's president, Kassym-Jomart Tokayev, said he was ready to legalize a mechanism to convert cryptocurrencies into cash. And in July 2022, the same Tokayev had already enacted new tax rates for Bitcoin and cryptocurrency miners: a way to institutionalize this activity without burdening it with dissuasive taxes.
The increase in the price of energy sold to miners, new reporting requirements, new tax guidelines, the closure of illegal mining farms ... This takeover of a sector whose practices sometimes border on the Wild West is not alarming, on the contrary: it reflects the growing interest of the Kazakh authorities for an activity that, in the long term, needs stability and visibility more than uncertainty and volatility.
By regulating the sector, Kazakhstan is promoting its sustainable expansion and establishing itself as the hub of Bitcoin and cryptocurrencies in Central Asia and among the former satellites of the former USSR. If Bitcoin miners and other traders want to continue to find the best business conditions in Kazakhstan, it is only natural that Kazakhstan should also find its way.
However, this is far from the case at the moment. While some estimates put the annual impact on the Kazakh economy at 1.5 billion dollars, today the sector only brings in 1.5 million dollars!
A margin of progress that explains the keen interest of the authorities for cryptocurrencies, as confirmed in June 2022 by the President of the National Bank of Kazakhstan, according to which “we will not ignore this market. We want to take maximum advantage of the innovative potential that these technologies offer us.”
Isn't this a motto that could be applied to Bitcoin miners and professionals? Innovative, accessible, stable, and on its way to standardization: so Kazakhstan ticks all the boxes to become the promised land of Bitcoin and cryptocurrencies.
The initiative of the Kazakhstan authorities is to be applauded, as they are choosing a path opposite to that of many countries around the world. Rather than unnecessarily fighting the Bitcoin revolution, Kazakhstan is choosing to frame this revolution to take the greatest possible advantage of it. An attitude that should hopefully give other countries pause for thought.
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