Kazakhstan’s Financial Monitoring Agency (AFM) has intensified its regulatory stance toward the cryptocurrency sector, shutting down 130 unlicensed platforms and seizing $16.7 million in digital assets as part of a nationwide campaign to curb money laundering and unregistered crypto activity.
Officials are pairing the crackdown with new financial controls, including mandatory identity verification for high-value card transactions and planned biometric authentication for all cash withdrawals, signaling one of Central Asia’s ambitious efforts yet to interlink financial transparency with digital identity.
AFM enforcement drive targets shadow exchanges
Deputy Chairman Kairat Bizhanov confirmed the results of the enforcement campaign during a government briefing, revealing that 81 underground networks designed for crypto‑to‑cash conversions processed over $43 million in illicit transactions.
“These entities exploited anonymity gaps to obscure the movement of criminal proceeds,” Bizhanov said. “Unregulated digital asset operations threaten the transparency and stability of our financial system.”
According to domestic law, crypto trading in Kazakhstan is legally permitted only through platforms licensed by the Astana Financial Services Authority (AFSA) and integrated with the formal banking sector.
Financial monitors also recorded a $1.8 billion annual rise in ATM cash withdrawals, totaling $24.1 billion, underscoring continued vulnerabilities in bridging digital and physical money flows.
Tightened controls
In response, the government has launched a new compliance initiative requiring identity verification for any card transaction exceeding ₸420,000 (about $913). Financial institutions must verify users through state databases and preserve ATM surveillance footage for six months.
Authorities are also developing a nationwide biometric verification system, leveraging facial recognition and fingerprint scanning, to authenticate all cash‑based transactions.
While officials frame these systems as essential for combating illicit finance, many analysts highlight potential privacy and civil‑liberty trade‑offs.
“This is one of the boldest experiments in tying physical identity to financial transparency,” cybersecurity expert David Sehyeon Baek said. “On paper, it deters impersonation and makes compliance measurable, but without robust oversight, it risks turning into an instrument of mass surveillance.”
Baek emphasized that states introducing similar programs must “weigh proportionality carefully, ensuring anti‑crime objectives don’t erode citizens’ privacy or create permanent biometric registries vulnerable to abuse.”
Legislative and institutional shifts
Parallel to enforcement actions, policymakers are advancing a new digital‑asset regulatory framework, aimed at closing loopholes that previously fueled capital outflows and unregistered transactions.
According to Astana Times, National Bank Deputy Chairman Aidos Sholpankulov said the absence of clear legal definitions and oversight mechanisms had weakened investor protection and transparency.
To address this, the National Bank and other state agencies have drafted amendments to:
- Define the legal status of digital financial assets and transactions.
- Introduce a universal licensing system for crypto service providers.
- Establish a regulatory sandbox for pilot projects in digital finance and blockchain innovation.
Regarding speculation about a possible “crypto reserve” within the National Bank, Sholpankulov clarified that confiscated assets would remain subject to existing procedures under the Ministry of Finance, managed by the State Property Committee for valuation, sale, and budget allocation.
“Crypto assets are treated as property under Kazakh law,” Sholpankulov stated. “There is no justification for establishing a separate digital reserve under the National Bank.”
Broader financial strategy
Kazakhstan’s evolving policy mix marks a continued shift from its earlier identity as a global crypto‑mining hub toward a regulated digital‑finance model centered on transparency and institutional accountability.
The country’s Digital Tenge (CBDC), launched in November 2023, is now used in public procurement and social payments, and authorities plan to expand its programmable features to enhance budget tracking and anti‑corruption controls.
Future legislative phases, expected by May 2025, are set to impose:
- Unified national licensing for all virtual‑asset service providers.
- Stablecoin reserve audits akin to traditional financial audits.
- Value‑Added Tax (VAT) coverage on crypto‑denominated payments.
- Creation of a State Fund of Digital Assets to manage confiscated holdings and exposure to market volatility.
Analysts see these measures as part of a broader roadmap aligning with the country’s Digital Kazakhstan 2029 strategy, which aims to build a transparent, investor‑friendly digital economy that accommodates innovation without sacrificing compliance.
Expert perspective
While international observers credit Kazakhstan for progressing toward a structured digital‑asset regulatory model, privacy advocates continue to question biometric‑driven financial surveillance.
“Biometrics can strengthen digital trust, but in the wrong hands, it normalizes total visibility of personal finances,” Baek cautioned. “Strong data‑protection laws must accompany technological oversight.”
Industry leaders, meanwhile, argue that clear rules, strong KYC standards, and a credible CBDC ecosystem could make Kazakhstan a regional hub for compliant Web3 projects and institutional capital.
Oleksii Shumak
Disclaimer: All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice. Please note that despite the nature of much of the material created and hosted on this website, HODL FM is not a financial reference resource, and the opinions of authors and other contributors are their own and should not be taken as financial advice. If you require advice. HODL FM strongly recommends contacting a qualified industry professional.
