Cryptocurrency Business Activities in the Republic of Kazakhstan

The field of crypto-assets is one of the rapidly developing sectors of the digital economy in Kazakhstan. The government is taking several strategic measures to create favorable conditions for the growth of the digital economy by improving the investment environment and refining regulatory frameworks. A range of incentives has been introduced to enhance the investment climate for cryptocurrency-related activities, some of which are outlined below.

Kazakhstan has seen significant growth in the cryptocurrency business, particularly since 2020, when it became one of the world leaders in digital cryptocurrency mining. According to publicly available data, Kazakhstan ranked second globally after the United States (35.4%) in Bitcoin mining in 2021, with an 18.1% share of the total volume. In recent years, measures have been taken to improve the business environment for this industry.

In 2024, Kazakhstan introduced new regulations for cryptocurrency operations, including tax reductions for cryptocurrency exchanges and mining companies. These measures aim to attract investors and support the development of the crypto industry in the country.

Key Legislative Changes in 2024:

• Tax Reforms: On January 1, 2024, amendments to Kazakhstan's tax legislation came into effect. The law aims to reduce the tax burden on cryptocurrency exchanges and mining companies. Digital asset transactions on trading platforms registered in Kazakhstan are exempt from VAT.
• Licensing Requirements: According to the Law "On Digital Assets in the Republic of Kazakhstan," digital miners must operate under licenses. This regulation of cryptocurrency exchanges and mining farms promotes greater market transparency and reliability.
• Technical Infrastructure Development: Kazakhstan continues to develop technical infrastructure for cryptocurrency mining. Thanks to its affordable electricity and favorable conditions for hosting mining farms, Kazakhstan has become one of the leading countries in cryptocurrency mining.
• International Cooperation: Kazakhstan actively collaborates with international organizations and companies to exchange experience and technology in the field of cryptocurrencies. This allows the country to maintain a leading position in the crypto industry and adopt advanced practices and technologies.

Since cryptocurrency businesses in Kazakhstan are subject to licensing, there are currently licenses available for the following types of services in the crypto-asset sector:

Licensing of Cryptocurrency Exchanges:

• Regulatory Body: The Financial Control and Supervision Agency (AFCA), a division of the Astana International Financial Center (AIFC) in Astana, is responsible for issuing licenses. This body regulates the activities of financial organizations, including cryptocurrency exchanges, ensuring compliance with legal requirements. 
• Process Duration: The licensing process can take an average of 3 months, depending on the complexity of document preparation and fulfillment of all requirements. 
• Required Documents:some text
  • Articles of incorporation (charter, registration certificate).
  • Business plan (including the exchange's strategy, financial plan, and forecasts).
  • Proof of the company's financial stability (audit reports, bank statements).
  • Description of IT infrastructure and data protection measures.
  • AML (Anti-Money Laundering) and KYC (Know Your Customer) policies.
  • Resumes of key employees and company management, including information on their qualifications and experience.
  • Documents confirming the necessary capital for business operations.
  • Evidence of compliance with information security and technical standards.

Cost: Licensing fees vary depending on the specific service provided. For example, the fee for a cryptocurrency exchange license in 2024 is 15,000 times the monthly calculation index (MCI), equivalent to 51,750,000 KZT.

Licensing for Mining Companies:

• Registration and Approval: Mining companies in Kazakhstan must register and obtain permission to operate. The law sets out requirements for environmental standards, energy efficiency, and tax compliance.
• Application Portal: Licenses can be obtained through the "e-licensing" portal at elicense.kz.
• Cost: For miners with their own data center: 2,000 MCI (7,384,000 KZT). For miners using third-party facilities: 5 MCI (18,460 KZT).
• Timeframe: The issuance process typically takes 15 business days, while re-licensing may take 2 business days.

Licensing for Digital Asset Services:

• Services Covered: This includes custodial services, wallet management, and financial consulting related to cryptocurrencies.
• Licensing Body: Licenses are issued by AFCA, with the processing time depending on the company's scale and complexity. The process generally takes 3 months or more, depending on additional requirements or necessary checks.
• Required Documents:
  • Company charter and registration certificate.
  • Business plan with service descriptions, financial models, and forecasts.
  • Information security report.
  • AML and KYC policies.
  • Financial statements and capital verification.
  • Resumes of key employees.
  • Technical infrastructure documentation.
  • Tax compliance certificates.
• Cost: For crypto-depositaries: 7,000 MCI (24,150,000 KZT). For crypto-wallets and exchanges: 3,000 MCI (10,350,000 KZT).

Licensing for Fintech and Blockchain Services:

• Services Covered: Depending on the company's offerings, licenses may be required for blockchain technology usage, smart contract development, or tokenized asset creation. AFCA is responsible for issuing these licenses.
• Process Duration: Document submission and review can take up to 4 months.
• Required Documents:
  • Founding documents: charter, registration certificate, trade registry extract.
  • Business plan: detailed description of services, financial model, market forecasts, and development strategy.
  • Information security policies.
  • AML/KYC procedures.
  • Financial reports.
  • Key personnel resumes.
  • Technical documentation: software, infrastructure details.
  • Tax compliance reports.

• Cost: For companies working with blockchain and smart contracts: 5,000 MCI (17,250,000 KZT). For fintech solution developers: 3,500 MCI (12,075,000 KZT).

Final Words

The cryptocurrency business in Kazakhstan is evolving rapidly, and the country's legal system is striving to keep pace. The introduction of cryptocurrency regulation, the legalization of mining, and measures to combat illegal activities are crucial steps towards establishing a sustainable and transparent cryptocurrency market. Going forward, further legislative improvements and the integration of best global practices are expected, positioning Kazakhstan as a leading player in the global cryptocurrency industry.

Esplora Legal has extensive experience obtaining licenses for crypto-asset businesses and is ready to provide legal consultation at any stage of operations in the crypto-asset sector.