For three years – 34 million US dollars. Such was the money turnover of the illegal ABS Change crypto-exchange office operating on the territory of Kazakhstan. The work of the point was stopped, and the media wrote about it for almost a week.
Digital assets (or simply “cryptocurrency”) have come to us forever. Many people see crypto as an easy solution to all problems, but few people realize that the risks in this matter are very high and for the competent handling of digital assets, you need not only to have ordinary traditional money, but also a proper regulatory framework.
Therefore, in Kazakhstan, only one organization – the Astana International Financial Center (AIFC) – has the right to regulate activities related to digital assets. The AIFC Financial Services Authority (AFSA) is the independent financial regulator of the AIFC. He develops the entire legal framework for new financial technologies, testing ideas and projects in a protected legal field, where risks for consumers are minimized.
An example of such work is FinTech Lab, that is, a regulatory sandbox. In a sandbox in a specially protected environment, companies can test innovative financial services without being immediately subject to the entire set of regulatory requirements. The FinTech Lab participant has two years to prove his viability. If this happens, then the company receives a full license from the regulator and begins to work in a full-fledged “adult” mode, if not, it leaves the sandbox. The requirements in the sandbox, although not full-fledged, as for other financial market participants, are strict: in the five years of the sandbox’s existence, only one company has received a full license and began to work not in experimental, but in real mode. Before issuing a license to a fintech organization, AFSA conducts a deep and thorough due diligence, and subsequently carries out ongoing supervision of the company’s activities.
Now seven crypto exchanges are registered in the AIFC, their full list can be found on the regulator’s website at link. Crypto exchanges registered with the AIFC must comply with a whole package of requirements, each of which is aimed at maximum protection of consumer interests.
Let’s take a look at some of these requirements.
For example, AFSA does not allow the use of crypto exchanges for the purposes of money laundering and terrorist financing. To do this, crypto exchanges are required to provide “know your customer” and “know your transaction” procedures. This means that crypto exchanges not only carry out the identification and due diligence of each client, but also monitor the client’s personal digital wallet and transaction history for signs of violation of the anti-money laundering legislation. To be financially stable and provide minimum guarantees of customer rights, crypto exchanges must have a minimum regulatory capital. This is important to cover losses in case of loss of digital assets. For example, cyber attacks on a crypto exchange.
If you are a retail investor, then AFSA rules will not allow you to invest more than $1,000 per month (deposit above this amount is possible only with proof of income). If you consider yourself a professional investor, then you will have to pass a test to determine your professional status, as well as store digital assets in cold wallets.
Last year, a special pilot project, testing the interaction of the AIFC crypto-exchanges with Kazakh second-tier banks (STBs). Currently, six AIFC crypto exchanges are participating in the pilot (their participation in the project is voluntary and depends on whether they can comply with its rules) and seven Kazakh second-tier banks. The results of the project will form the basis for amendments to national legislation and AIFC acts regulating the operation of digital assets.
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