Here’s Why Kazakhstan Won’t Ban Mining and Cryptocurrencies
This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Over the past few days, crypto media have been stirred up by the news that the government of Kazakhstan is considering a ban on cryptocurrency mining. […]
This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post.
Over the past few days, crypto media have been stirred up by the news that the government of Kazakhstan is considering a ban on cryptocurrency mining. This was alleged by Daniyar Akishev, Governor of the National Bank of Kazakhstan. Is the country really going to become the first to ban mining, or was that merely a statement by an official who doesn’t understand the technology? Let’s take a closer look at what’s actually going on in Kazakhstan.
Why Some People Want to Ban Mining
For 80 years, Kazakhstan was part of the Soviet Union, where entrepreneurship was treated as a criminal offense. Buying and selling any commodity by a private individual was considered profiteering, punishable by a prison term of up to seven years and confiscation of property. The underdeveloped entrepreneurship, along with the inability to reorient the economy and the slow pace of innovation, still hamper the development of most post-Soviet countries.
In modern-day Kazakhstan, most managers of large enterprises, as well as the top-ranking officials, have received Western education through the “Bolashak” state program fully covering the costs. Many of them are Ivy League graduates. The country is moving forward thanks to these people. Those who think in late 20th century terms are holding it back.
The Governor of the National Bank has never worked in business. He graduated from the Institute of National Economy, in Kazakhstan in the ‘90s, and is now trying to bring the country back to that decade.
The Innovations of Kazakhstan
Huge amounts of money are being spent to digitize Kazakhstan. 70% of the country’s gross domestic product comes from the sale of mineral resources such as oil, gas, and coal. The government is aiming to reduce the country’s dependence on minerals before the oil runs out, or its price falls again, provoking another economic crisis.
Progress is already being made. For example, Kazakhstan has the best e-government in the region, even better than that of Russia. In 2015-2016, the Doing Business ranking placed the country among the fastest growing economies in the world. In terms of GDP, the Kazakhstan is second only to the Russian Federation in its region.
The National Bank Has No Authority to Ban Mining
Nevertheless, there are still people in the country who are trying to “ban everything they don’t understand.” In October 2017, the Governor of the National Bank said that he didn’t really understand what cryptocurrencies were. Judging by his latest statements, he still hasn’t “figured it out”. Theoretically, mining and token trade may only be banned by the Ministry of Economic Development. However, no official from that department has made any such statement.
The National Bank’s stance does not comply with the state policy of Kazakhstan and had not been agreed with any other government body. We have already witnessed similar precedents in Nigeria and South Korea, where officials with little to no understanding of the concepts of cryptocurrency and blockchain tried to ban them. They “got slapped” by their country’s leadership and never repeated these attempts.
Since blockchain and cryptocurrencies are inextricably linked, a blockchain ban would undo the government policies from the last several years. To date, electricity rates in Kazakhstan are some of the lowest in the world. In the northern regions of the country 1 kWh costs less than 1 cent (USD). The Ministry of the National Economy of Kazakhstan has estimated the excess capacity at 3,500 MW.
If the surplus electricity is sold to mining farms, Kazakhstan may receive up to $1 billion extra revenue each year and will be able to compete with China and Canada in the cryptocurrency mining sector. I bet NBK’s Governor is starting to see for himself that the progress is unstoppable and no one should get in its way.
Getting Rid of the Resource Curse
The country’s digital transformation is a step towards reducing its dependency on mineral resources and a shift away from exporting mineral resources towards exporting technologies. At Lisbon’s Web Summit last year, Kazakhstan presented 42 projects for the country’s digital transformation, which will receive up to $1 billion of investments. Among these projects are the digitization of resource extraction, the introduction of an intelligent transport system, the setting up of a unified system of digital contracts, the drive to digitalize tax control, etc.
Adopting Blockchain Technologies
Most of the changes are related to the introduction of blockchain-based technologies. Kazakhstan was one of the first countries in the world to announce the adoption of the blockchain. This has been repeatedly pointed out by the country’s President, the Prime Minister and the line ministries. For example, President Nursultan Nazarbayev has suggested implementing blockchain in the taxation system, online cargo tracking and customs operations.
Blockchain-based VAT administration is scheduled for launch in 2019. It will help track financial transactions of taxpayers, ensure guaranteed VAT refunds and preclude gray areas. Kazakhstan’s representatives are also participating in negotiations on the creation of a Eurasian cryptocurrency.
The statement of the National Bank’s Governor goes against the state policy and the country’s development strategy. This fall President Nazarbayev mentioned the capitalizations of bitcoin and ethereum and described cryptocurrencies as “absolute innovations”. “70 billion dollars of bitcoin capitalization represents an absolute growth, absolute productivity, and absolute innovation. That’s exactly what we need,” Kazakhstan’s head of state said.
Do you think Kazakhstan is poised to become a leader in cryptocurrency adoption and blockchain implementation in Central Asia? Tell us in the comments section below.
About the author: Leonid Muravjov is VP at the Blockchain and Crypto Technology Association of Kazakhstan. Alongside developing the blockchain ecosystem in the country, Leonid is a CEO and founder of ROI Group, a marketing and consulting agency with 40 employees and $6 million of turnover. Among ROI clients are Visa, #1 Kazakhstan bank, #1 Kazakhstan telco, leading construction, insurance, and FMCG companies.
Email: [email protected]
Images via Shutterstock.
Disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.