Kazakhstan Eyes Crypto for State Reserves in Bold New Plan

The National Bank of Kazakhstan (NBK) is exploring how alternative assets may aid the country’s economy.

Kazakhstan’s idea for a reserve is yet another example of its growing crypto adoption, as the nation has been involved in the mining scene for a while, and with the most recent plans for a “CryptoCity.”

What Will Be Included?

According to a press release from the local news outlet Kursiv, NBK is evaluating the inclusion of digital assets in its sovereign and foreign currency reserves.

The governor of the bank, Timur Suleimenov, shared his thoughts during a press conference, citing the example from other countries:

“We have an alternative portfolio of gold and foreign exchange reserves and an alternative portfolio of the National Fund. There we use aggressive strategies to generate higher investment returns.

We looked at the experience of the Norwegian fund, the American experience, and the experience of Middle East funds. They have certain investments in either crypto assets directly, or in ETFs and shares of companies that are closely related to crypto assets.”

Despite the interest in such a reserve, the bank is approaching the idea with caution, as, albeit boasting potentially high returns, crypto assets are volatile.

“This is not an easy question, so there is no need to rush here. Yes, such assets can bring high returns, but at the same time they are characterized by high volatility”, added the bank head.

In addition to this reserve, Kazakhstan is also planning on creating a state-mandated fund for crypto assets seized by law enforcement officers. The report also states that the infrastructure could include assets obtained from legal mining operations.

The largest landlocked country in the world is also intending to restrict cryptocurrency trading exclusively to exchanges authorized by the Astana International Financial Centre (AIFC).

Current State of Crypto Adoption in The Country

Kazakhstan has been involved in mining for several years, with most reports dating back to as early as 2017.

Although cryptocurrency was not legal tender at the time, mining was encouraged. President Kassym-Jomart Tokayev addressed the country during his 2020 speech, in an effort to attract $1.2 billion for infrastructure within five years, before neighboring countries surpassed them.

By the summer of 2021, the country had become the second in the world for hash rate—the measure of how much computational power is dedicated to mining.

In recent events, news of a “CryptoCity” surfaced, marking the country’s latest expansion in the widespread acceptance of digital assets.

The small city of Alatau in the Almaty Region was selected to host this latest venture, with plans for the area to be entirely crypto-friendly and to use digital assets exclusively as payment methods.

Despite all the advancements and headwinds, Kazakhstan still lags behind in retail adoption compared to its global rivals.

According to the 2024 Global Crypto Adoption Index, the country ranks 57th out of 151 countries included in the report, reflecting relatively low volumes of transactions and engagement in various blockchain protocols.