In a recent move, Kazakhstan authorities have taken measures to block their citizens from accessing the website of the popular cryptocurrency exchange, Coinbase. This action comes as part of a broader global trend where governments have been increasingly focused on regulating and licensing cryptocurrency service providers to bring them under specific legal frameworks. These efforts aim to address concerns related to illicit activities such as money laundering and terror financing, as well as to ensure consumer protection, especially in the wake of recent incidents such as the FTX exchange collapse.
The issue in Kazakhstan stems from allegations that Coinbase violated the country’s laws concerning digital assets. The Ministry of Information in Kazakhstan, according to a report by the local publication Kursiv, justified its decision to block access to Coinbase’s official website by referencing specific clauses within the Law on Digital Assets. The relevant clause, Article 11, Section 5 of this law, clearly outlines that the issuance and circulation of unsecured digital assets, as well as the operations of cryptocurrency exchanges dealing with such assets, are prohibited in Kazakhstan, except within the jurisdiction of the Astana International Financial Center (AIFC).
Operating in Kazakhstan requires a license from the Astana Financial Service Regulatory Commission (AFSA). Notably, in June 2023, AFSA granted permission to Binance to launch a regulated crypto exchange within the country. The process for companies to operate in Kazakhstan involves submitting a preliminary application for registration, followed by a complete application within two months. If these conditions are met, AFSA grants an in-principle approval before the complete application process proceeds, which is the stage Binance reached with its in-principle approval received in August 2022.
As of 2023, Kazakhstan has an estimated 1.48 million cryptocurrency users, reflecting a crypto penetration rate of 7.61% in the Central Asian nation. This rate is projected to increase to 11.50% by 2027. Consequently, Coinbase, along with other cryptocurrency service providers, is faced with the imperative to comply with Kazakhstan’s regulatory framework in order to tap into this growing market.
In response to these developments, BeInCrypto has reached out to Coinbase for a statement on the situation. The incident in Kazakhstan highlights the ongoing global efforts to reconcile the innovative, decentralized nature of cryptocurrencies with the need for oversight and regulation to safeguard both the financial system and the interests of consumers.