Crypto-currencies: To be or not to be?

On Wednesday in Almaty on the Expert Update site organized by Vlast online magazine and Verny Capital Company Group, one of the most burning topics of the last year – the crypto-currency market in Kazakhstan – was discussed. Industry experts showed restrained conservatism, but delayed in insisting on the immediate development of a regulatory framework.

Aidarkhan Kusainov, an adviser to the Chairman of the Board of the National Bank, at the very beginning of the event clarified that it was premature to create a regulatory framework for the crypto-currency market in Kazakhstan. He stressed that the issue was “under discussion” all over the world, and, therefore, “we are not late”. “In general, there are doubts whether it is moving forward ...”, he added meaningfully. The position of the regulator was, to some extent, supported by Kazakhstan financier Azamat Dzholdasbekov, “Why can bitcoin-type crypto currency not be regulated in Kazakhstan? Because Kazakhstan actually signed a bunch of agreements on combating underhanded money, money laundering and financing of terrorism. So, when international organizations get to the crypto currency, basically, Kazakhstan will not need to invent anything, they will do it for it, it will simply have to follow”, said the expert.

Meanwhile, Kazakhstani and world experts are trying in vain to understand the basic concepts. “Even at the stage of determining what a blockchain is, there is no single consensus in the world. There are two not identical definitions. In one of them, the word “cryptography” is not used at all”, emphasized Konstantin Aushev, the Head of KPMG IT consulting group. Konstantin Pak, the Director of the Center for the Development of Financial Technologies and Innovations of the Financial Institutions’ Association of Kazakhstan, also identified a big problem with terminology.

“The definition of a crypto-currency is itself a fraud. It is not a currency, not a means of payment, does not have the quality of money. It is something else. Crypto-exchange has nothing to do with the stock exchange. Commonly, it is software, behind which there is, sometimes, one person. It is an establishment absolutely unregulated, not legally registered, which takes someone’s money and does something with it. Exchange rates published by crypto-exchanges are also absolutely opaque and biased, there are no mechanisms of formation. The algorithm for calculating capitalization is also absolutely bubbly”, said the FIAK representative.

Teimur Tmuslim, a professional trader and head of Asia Blockchain non-profit association, in turn, stresses that the crypto-currency is not an investment. “I do not see sanity right now in this market. We have a purely speculative market. For Kazakh people, this is the way out where to keep money – we have either deposits or crypto-currencies”, the expert sadly notes. The experts see the way out in the total propaganda of financial literacy only.

Kazakhstan Blockchain and Crypto-Currency Association is skeptical about the idea of such education: “The task of comprehensive education of all people in everything is sad, in fact, because it is impracticable”, says Eset Butin, the Head of the Association. In his opinion, it is much more important to focus on “creating a platform and a legal basis for those tools, those realities that exist today”. We recall, the National Bank has already made such an attempt, circulating the corresponding circular at the beginning of the year: according to the document, crypto-currency operations are prohibited in Kazakhstan.

“We need to protect people, non-professional investors from transactions with this incomprehensible asset”, expressed the regulator’s consolidated point of view Kusainov. Butin emphasizes that the recommendations of the National Bank in terms of the crypto-currency “do not have legal justification”. According to him, the circular would have real effect only if the regulator has clearly defined the list of exchanges prohibited to interact with, but so far this has not been done”. The issue of crypto-currency for the National Bank is the 59th issue”, the Head of KABK remarked ironically recalling the case when the meeting of his team with the regulator’s specialists was suddenly canceled without explanation.

Butin suggests starting with the creation of light-mechanisms in Kazakhstan, which would allow brokers and dealers to form at least 1% of their assets in crypto-currency. According to him, this would legalize the opportunity for ordinary Kazakhstanis to enter the market, which would act through professional participants. In addition, the Government should take care of the organization of a “sandbox” in the country, where it would be possible to obtain basic knowledge about the crypto-universe, train on crypto-currencies and eventually launch their own blockchain-start-up. The first of these is Astana International Financial Center. “At the end of February/beginning of March we expect a set of regulatory documents from AIFC, which will prescribe the mechanism and rules for the operation of the crypto-valley spoken about by the Center management several times”, Butin said.

While the professional community is in tense expectation, the discourse around the negative consequences for the Kazakhstanis of dragging with crypto-currencies is gaining momentum. “Now the question resolves into how to avoid negative consequences, if something happens with this market”, Pak emphasizes. “We see that the problem with investing in bitcoin-type crypto-currencies is a consequence of the fact that there are too many poor in Kazakhstan. If Kazakhstan manages to straighten Ginny’s coefficient so that most people belong to middle class, no one would be interested in problems with crypto-currencies”, Dzholdasbekov said.

People should understand that the image of the crypto-currency in the virtual space has nothing to do with reality yet – all experts are sure about it. “The idea was to get fast, cheap, anonymous means of payment, and we got expensive, slow, non-anonymous means of payment”, FIAK representative summed up. Kusainov makes it clear that even the widely advertised ICO Telegram (attraction of investments in the form of sales of crypto-currencies – V.) is rather not about crypto-currencies, but about crypto-assets (in fact, about the company’s shares). “If you have General Motors shares, you can use them to pay”, the adviser to the Head of the National Bank said. In addition, the attraction of money to Kazakhstan through ICO does not seem promising yet. Here, Kusainov damped everybody’s spirits, “Our people cannot attract dollars! We have problems with attracting normal investments”.