On the illegal activities of crypto exchanges on the territory of the Republic of Kazakhstan

In order to join the ranks of our Association, most crypto exchanges (Digital Asset Trading Facility) that have received a license from the regulator are actively showing interest.

On the territory of Kazakhstan, the issuance and purchase and sale of unsecured digital assets is strictly prohibited (clause 5 of Article 8 of the Law on Digital Assets in the Republic of Kazakhstan) and is permitted only on the territory of the Astana International Financial Center. This ban has been in effect since 2020 (Law of the Republic of Kazakhstan dated June 25, 2020 No. 347-VI ZRK).

Therefore, the activities of crypto exchanges can be regarded as legal only if they have the appropriate AIFC license. The remaining platforms and methods of crypto exchange are criminal activities, which in the jurisdictions of developed countries they are trying to combat with all measures.

Cryptocurrency without proper regulation is an ideal tool for illegal withdrawal, laundering and hiding funds obtained through illegal means, such as corruption, for example. Crypto currency is widely used to finance criminal activities and terrorism. By trading or storing crypto assets on illegal platforms, a client of such a crypto exchange, against his will, may become involved in criminal acts in which the crypto asset he purchased was used.

Crypto exchanges that have not received a license from the regulator do not pay taxes to Kazakhstan, and moreover, they help conceal the income of their clients. Also, their activities do not guarantee the safety of their clients’ funds, since such crypto exchanges have not assumed the legal obligations of the country in which they operate. Most of these exchanges are registered in dubious jurisdictions, therefore, if they lose their deposits, the law enforcement agencies of Kazakhstan are unlikely to help clients of such exchanges. Moreover, clients (Kazakhstanis) of these exchanges may be asked counter questions for their activity on such dubious platforms in terms of their legality. Each such exchange can use depositors’ funds at its own discretion at any time. And a clear example of this is the case of the world-famous FTX exchange.

And finally, the activities of illegal crypto exchanges put licensed crypto exchanges in unequal conditions, which incur costs for obtaining a license, maintaining a minimum capital, operating an information system, paying expensive compliance specialists, AML, etc. to properly comply with regulatory requirements. All these expenses cause an increase in the cost of exchange services and lead to a decrease in demand from clients.

In Kazakhstan, without any difficulties, you can use the applications of crypto exchanges operating without an AIFC license. Among those that are known to me: binance global (not to be confused with binance.kz), bybit global (not to be confused with bybit.kz), kucoin, okx, mexc, etc. All of them, according to the requirements of Kazakhstani legislation, must be immediately blocked.

Based on forecast data from experts and traders, a significant increase in the value of the main crypto currency, Bitcoin, is expected in the near future. This fact will undoubtedly arouse investment interest among Kazakhstanis. Inaction on the part of responsible authorities regarding illegal sites can give society the illusion of their legitimacy and encourage them to engage in illegal activities.

In this regard, I would like to hear the legal position of KR Karzhy Narygyn Retteu Zhane Damytu Agenttiginin Resmi Parakshasy, as well as KR Sybaylas Zhemkorlykka karsy kyzmeti / Anti-Corruption Service of the Republic of Kazakhstan, Memlekettik Kirister Committee State Revenue Committee , Kazakhstan Ulttyk Banks National Bank of Kazakhstan and Astana International Financial Center " - AHKO / AIFC.

The International Organization of Securities Commissions (IOSCO), as well as the Financial Stability Board, have already spoken out on this issue in their recommendations:

“Authorities should ensure that they have the authority and capacity to address risks arising from attempts by crypto asset issuers and service providers to evade regulation and oversight by operating in foreign jurisdictions.”

The main task of our Association is the development of the Kazakh crypto ecosystem, minimizing all risks for society, the state and business activities in this area.

Therefore, our Association believes that only legal crypto exchanges should operate in Kazakhstan, and for this we will make every effort.