- Kazakhstan allows traders to use bank accounts to trade in cryptocurrency.
- Chinese crackdown on crypto mining transforms Kazakhstan as a mining hum.
- the International Monetory Fund warns that cryptocurrency is not a suitable legal tender.
Yerevan (CoinChapter.com) – For critics who are in a hurry to write off cryptocurrency, we suggest they wait. If trading through blockchains, digital wallets, and off-the-counter exchanges weren’t convincing enough that cryptocurrency is here to stay, there is more that should make them reconsider.
Cryptocurrency is entering the banking system. At least one country, Kazakhstan, has decided to allow people to buy and sell cryptocurrency using their bank accounts officially.
Bitcoin-a currency at last?
According to the Kazakh Association of Blockchain and Data Center Industry report, crypto exchanges can soon start working with local banks to facilitate their clients to deal in cryptocurrencies officially.
However, only those registered crypto exchanges based on the Astana International Financial Center (AIFC) will qualify.
AIFC is the country’s financial hub established by the Government and tasked with attracting financial resources and investments.
Essentially, this development makes cryptocurrency a legal currency. Investors need to join an authorized crypto exchange and use an account from a bank with AIFC registration. They can thus transfer money or buy or sell cryptos online. They can even exchange the cryptocurrency into fiat money and deposit it in their bank accounts.
Crypocurrency in Kazakhstan-From ban to boom
The Government of Kazakstan caught media attention for its harsh stance against cryptocurrencies. Clamping down on the industry, it went as far as prohibiting cryptocurrency circulation in the country.
Ironically, the ban is still in place. However, after the pilot project, the ban may become more lenient or may get canceled altogether. It will take at least one year for the Government to assess the risk and benefits.
So what caused the Kazakh government to re-visit their attitude vis-à-vis crypto?
Mostly, the significant drop of China’s share in global Bitcoin mining, owing to extensive crackdowns. The Chinese crackdowns resulted in Kazakhstan emerging as an alternative destination for miners. As mining companies started pulling out, China’s loss became its western neighbor’s gain.
Canaan, one of the world’s largest manufacturers of bitcoin mining machines, announced it is setting up a base in Kazakhstan.
Additionally, BIT Mining, a prominent mining company originating in Shenzen, also withdrew from China and announced its relocating its machines to Kazakhstan.
Kazakhstan’s cheap electricity helped the country reap the fruits of China’s crypto crackdown.
The change in China’s policy helped the share of Kazakhstan’s mining grow six times. Currently, Kazakhstan is the third-largest producer of cryptocurrency in the world. Around six to eight percent of the world’s total mining volume is based in Kazakhstan.
Kazakhstan ignores IMF’s cryptocurrency warnings
The decision of Kazakhstan to allow people to use bank accounts to trade in cryptocurrency comes at an odd time. First, the International Monetary Fund (IMF) warned that cryptocurrency is not a suitable legal tender. In a blog post, the IMF warned that the risks and costs of making cryptocurrencies legal tender outweigh the benefits that a country may expect to reap.
” cryptoassets—including Bitcoin—come with substantial risks to macro-financial stability, financial integrity, consumer protection, and the environment.”the IMF warned.
Other concerns expressed by the IMF include price volatility, environmental impact, difficulty in setting fiscal policy, etc.
Whether Kazakhstan’s decision to welcome cryptocurrency will be beneficial or not remains to be seen. Meanwhile, the IMF thinks making crypto a national currency is going “a step too far.”