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Kazakhstan Fintech Laws and Regulations

Kazakhstan Fintech Laws and Regulations

Kazakhstan Fintech Laws and Regulations

Kazakhstan Fintech Laws and Regulations:

Key Developments and Insights

Kazakhstan’s fintech sector is undergoing rapid development, driven by key legislative changes and strategic government initiatives. The fintech journey began in 2015 with the adoption of a specialized law on informatization, but it gained significant momentum in 2017 with the launch of the “Digital Kazakhstan” program. This initiative aims to accelerate economic growth and improve quality of life by integrating digital technologies, positioning the country for long-term success in the global digital economy.
Although the COVID-19 pandemic caused a temporary slowdown, it underscored the advantages of fintech solutions in Kazakhstan, leading to a resurgence of growth starting in 2021. The country’s strong legal framework, geographical advantages, and adaptability to global fintech trends have helped position Kazakhstan among the top 25 countries in the world for ease of doing business, ahead of nations like China, France, and Italy.

Key Drivers of Kazakhstan’s Fintech Growth

The fintech boom in Kazakhstan was partly driven by the influx of cryptocurrency miners from China after the country’s 2021 ban on mining activities. This migration revealed gaps in Kazakhstan’s fintech infrastructure but also led to improvements in fintech regulations. As a result, Kazakhstan has since optimized its fintech ecosystem and is now better prepared for market challenges.
Kazakhstan’s fintech sector is also supported by the private sector, with major banks, financial institutions, and IT companies actively contributing to the fintech landscape. The collaboration between the private sector and government has led to the successful hosting of fintech and IT conferences, with high-level participation from government officials, including the president and ministers.
Today, a significant portion of financial services in Kazakhstan is automated and integrated with government services. Citizens can open bank or brokerage accounts in minutes and access government services remotely through local banking apps or the e-Government platform. Approximately 90% of government services are now available online, with fully automated services (requiring no human intervention) accounting for 6%.

Impact of Global Events and Technological Advancements

Kazakhstan’s fintech growth has also been influenced by global events such as the Russian-Ukrainian conflict, which led to an influx of IT companies and specialists from Russia. The country’s special business zones, offering various incentives, have attracted these firms, enriching Kazakhstan’s fintech market with new products and talent.
The ongoing collaboration between the government and private sector has driven continuous fintech innovation. Regulatory bodies in Kazakhstan have worked diligently to adapt financial regulations to accommodate new fintech products and services while ensuring a balance between innovation and consumer protection.
One of the key developments is the regulation of cryptocurrency and digital assets. Since 2023, a new law on digital assets has been in effect, legalizing cryptocurrency mining and establishing licensed exchanges. The National Bank of Kazakhstan (NBK) is also working on a digital tenge (a central bank digital currency) and plans to introduce an Open API platform, facilitating the growth of Open Banking.

Emerging Trends in Kazakhstan’s Fintech Sector

The rise of neobanks since 2023 has disrupted traditional financial services in Kazakhstan, offering consumers a wider range of options. Consumer lending models, such as “buy now, pay later,” have also gained popularity, reflecting fintech’s growing impact on consumer behavior.
Fintech companies operating in Kazakhstan must adhere to strict financial and consumer lending regulations. The government closely monitors compliance but remains open to feedback from the private sector to improve fintech-related laws. Blockchain and cryptocurrency technologies continue to gain traction, with institutions increasingly moving from observation to active implementation.
To further support fintech growth, Kazakhstan is in the process of adopting a Digital Code. This comprehensive legislative framework will cover various aspects of digital technology, including AI-driven data processing, the Internet of Things (IoT), and data privacy regulations. The Digital Code aims to foster a mature digital economy and accelerate the digital transformation of government services.

Regulatory Technology (RegTech) and Insurance Technology (InsurTech) in Kazakhstan

Kazakhstan is making strides in RegTech, leveraging digital services and platform solutions to improve compliance and risk management for financial institutions. The country’s “Concept for the Development of the Financial Sector” focuses on fostering an internationally integrated financial market with robust fintech and innovation. RegTech will play a pivotal role in helping financial institutions meet regulatory requirements, including anti-money laundering (AML) and counter-terrorist financing (CTF) obligations.
While InsurTech is still in its early stages in Kazakhstan, it is expected to follow a similar growth trajectory as RegTech. As more financial institutions adopt digital solutions, the demand for InsurTech innovations will likely increase, leading to new legislative and regulatory developments.
In conclusion, Kazakhstan’s fintech sector is evolving at a rapid pace, supported by strong government initiatives, collaboration with the private sector, and a favorable regulatory environment. With continued advancements in blockchain, Open Banking, and digital currencies, Kazakhstan is poised to become a fintech leader in Central Asia.

Regulatory Bodies

  1. Astana Financial Services Authority (AFSA):

    • Key regulator within the Astana International Financial Centre (AIFC).
    • Manages licensing, compliance, and regulatory functions for financial services, including fintech.
    • Operates independently from the Kazakhstan government.
  2. Ministry of Digital Development, Innovations and Aerospace Industry:

    • Responsible for formulating government policy on digital development and innovation, impacting fintech and RegTech initiatives.
  3. AIFC:

    • A unique jurisdiction in Kazakhstan aimed at attracting financial services and fostering fintech development.
    • Provides various preferential legal regimes, including tax exemptions and a simplified visa regime.

Key Regulations and Regulatory Approaches

  • Licensing Requirements: Fintech companies must adhere to licensing, registration, and disclosure requirements depending on their activities.
  • AIFC Acts: Regulate fintech comprehensively, defining financial services broadly (e.g., investment management, Islamic banking, insurance).
  • Regulatory Sandbox (Fintech Lab): Allows fintech firms to test products with reduced regulatory requirements before obtaining full licenses.
  • Consumer Protection: Fintech companies must comply with the Kazakhstan Consumer Protection Law, which prohibits misleading practices.
Legislative Framework
Key legislative acts governing fintech include:
  • Banking Law: Regulates banking activities, requiring appropriate licensing.
  • Control Law: Governs the regulation and supervision of financial markets and organizations.
  • Securities Law: Addresses securities issuance and trading.
  • Payments Law: Regulates payment systems and services.

Restrictions

  • No direct prohibitions on fintech businesses beyond licensing requirements.
  • Kazakhstan previously banned cryptocurrencies but has since legalized mining and cryptocurrency operations within the AIFC.

Cross-Border Business

  • Kazakhstan is keen to adopt successful international fintech practices and regularly consults industry representatives on regulatory changes.
  • However, there are currently no significant cross-border agreements specifically targeting the fintech sector.

Conclusion

Kazakhstan is establishing a robust framework for fintech through its dual jurisdiction system (the AIFC and the broader legal framework), encouraging innovation while ensuring compliance and consumer protection. As the sector evolves, ongoing collaboration with global fintech trends and practices will be essential for its growth and development.