Kazakhstan’s Crypto Leap: Digital Fund & Smart City Payments

President Kassym-Jomart Tokayev of Kazakhstan has proposed the creation of a national digital asset fund. This new institution is designed to strengthen the country’s standing in the digital financial landscape. He introduced this initiative during his yearly state of the nation address.

“Considering the present-day demands, a focus on digital assets is essential. Establishing a State Fund of Digital Assets, managed by the National Bank’s Investment Corporation, is highly recommended,” stated Tokayev. He elaborated, mentioning that the fund would secure a crypto reserve of promising digital assets.

The announcement demonstrates the significant growth of cryptocurrencies in Kazakhstan. A report by KPMG Caucasus and Central Asia indicates that crypto ownership has increased from 4% in 2022 to 8% nationwide by 2024. Licensed providers operating under the Astana International Financial Centre contributed $367,000 in tax during the first eight months of 2024, compared to $275,000 in 2023.

Furthermore, cryptocurrency mining contributed $10.4 million in tax revenue over a ten-month period, following $16.4 million generated in the previous year. Kazakhstan became a key player in Bitcoin mining in 2021 after China imposed its ban, although a substantial portion of mining activity remains unlicensed.

The government’s digital finance plans also involve the possibility of investing national reserves in cryptocurrencies, a move that mirrors strategies adopted by nations like Bhutan. Even former U.S. President Donald Trump has expressed intentions to initiate a strategic crypto reserve.

President Tokayev also emphasized the potential risks, stating, “Online fraud has significantly impacted the financial security of both the state and its citizens.” In response, he mentioned the creation of an anti-fraud center, biometric ID systems, and increased supervision of banks and telecommunications companies. He further emphasized that continuously upgrading legislation and law enforcement capabilities is vital in preventing cybercrime.

Kazakhstan’s Vision for a Smart City

The President also linked digital finance with the country’s ambitions for urban development. The plans for Alatau City, a new “smart city” near Almaty, include a digital-first infrastructure.

Envisioned as a central hub for finance, education, logistics, and leisure, this $7.2 billion project seeks to grow from a population of 52,000 to two million residents.

“Alatau City is intended to be the first fully digitalized city in the region,” Tokayev stated, adding that the city should implement everything from Smart City technologies to cryptocurrency-based payments.