Kazakhstan's Chief Fintech Authority Casts Doubt on Digital Tenge's Miraculous Solutions
Title: The Digital Tenge: Transforming Kazakhstan's Financial Landscape
Subheading: Central Bank Digital Currency and Open Banking Transform the Way Money Moves
Kickoff:
In the heart of Central Asia, Kazakhstan is paving the way for a digital future. With plans for a central bank digital currency, the digital tenge, and an open banking infrastructure, Binur Zhalenov, a leading digital officer at the National Bank of Kazakhstan (NBK), believes this innovation has the potential to revolutionize the world of finance. In this chat with The Astana Times YouTube channel, Zhalenov sheds light on the necessity of digital currency, the role of cash, and more.
A Digital Leap Forward
Central banks worldwide have been exploring digital currency offerings, led by China's digital yuan and e-CNY, which started pilots in 2017[1][2]. With 65 countries in the advanced stages of exploration, development, pilot, or launch[1], Kazakhstan is taking an "absolutely logical step" with the digital tenge[2]. Zhalenov, who chairs the National Payment Systems Corporation, emphasizes the digital economy's need for digital means of payment[2].
Two Worlds, One Advantage
The digital tenge combines the security and stability of government-backed cash with the convenience of private electronic money tied to commercial banks[2]. In the words of Zhalenov, digital tenge represents "the best of both worlds," offering users a secure, cheap, and safe way to make digital payments using their banking applications or debit cards[2].
Real-world Use Cases
Leveraging blockchain, the digital tenge introduces programmability, with immediate opportunities in improving government spending transparency and making budget administrators accountable[2]. The central bank also envisions broader applications, such as a payment settlement infrastructure for digital assets, particularly in light of recent regulations for cryptocurrencies and stablecoins[2].
Digital tenge is also poised to simplify cross-border payments, including a government-backed stablecoin that allows users to buy, invest in, and make cross-border transactions through their mobile banking applications securely[2]. Specialized use cases, such as business-to-business (B2B) and government-to-business (G2B) transactions, could also benefit from digital tenge, streamlining often slow and complex payment processes[2].
Reality Check
While the digital tenge offers numerous advantages, Zhalenov cautions that it is not a panacea. He stresses the need for other information systems providing proper data for the digital tenge to be truly effective[3]. Nevertheless, with a systematic approach, digital tenge can contribute significantly to combating corruption and improving transparency in government spending[3].
The Cash conundrum
Zhalenov acknowledges that cash will still have a role in the digital age, as only a small percentage of transactions are cashless in Kazakhstan[3]. As long as there is demand for cash, the central bank will continue to supply this option, focusing on inclusivity rather than pushing everyone into digital channels[3].
Leading the Charge
Zhalenov believes that Kazakhstan has carved a niche as a leader in financial technology, with its banks offering unique solutions unavailable elsewhere[4]. The integration of public services and private innovation, exemplified by the option for Kazakh consumers to apply for a mortgage entirely online, sets the nation apart[4]. This integrated digital experience, referred to as "super services," reflects real-life situations and aids in digitizing life situations for banks[4].
Legislation and the Future
Zhalenov remains optimistic about the forthcoming banking legislation, hoping it will enable various new activities in Kazakhstan's market and support the growing digital services, such as the digital tenge, unified QR codes, PCP transfers, open banking, and anti-fraud measures[4].
The Drive to Innovate
As a Bolashak scholarship graduate, Zhalenov's motivation to contribute to Kazakhstan's development fuels his passion for transforming the financial landscape[4]. The milestones his team achieves, such as the record-breaking payment systems turnover, are what make this digital journey truly magical[4].
Ultimately, the digital tenge is set to play a significant role in Kazakhstan's digital future, enhancing financial transparency, efficiency, and inclusivity.
Keep an eye out for a full interview with Binur Zhalenov on The Astana Times YouTube channel!
Enrichment Data
### Current Status of the Digital Tenge
## Progress Update
The digital tenge, Kazakhstan's central bank digital currency (CBDC), had its launch in November 2023[5]. It is supported by four banks that have launched payment cards linked to the program[5]. The digital tenge aims for widespread adoption within three years, targeting industrial operation.
## Future Plans
## Role in Government Spending
Plans for the digital tenge's role in government spending involve the enhancement of efficiency and transparency in financial transactions, potentially reducing corruption by providing a clear record of transactions.
## Cross-Border Payments
The digital tenge will facilitate cross-border payments, promoting financial inclusion and efficiency. However, specific plans for cross-border use have not been detailed in the current literature.
## Combating Corruption
The use of digital currencies like the digital tenge can help combat corruption by providing a transparent and traceable record of transactions. This can make it more challenging for illicit activities to go unnoticed. However, specific anti-corruption measures leveraging the digital tenge are not explicitly mentioned in recent reports.
## Contextual Role in Kazakhstan's Economy
Kazakhstan has been pushing for a role as a crypto hub in Central Asia, with efforts to ease regulatory restrictions and promote digital mining[1][2]. This environment suggests that digital currencies, including the digital tenge, will play a significant role in the country's financial and technological development. The Astana International Financial Centre (AIFC) is a key player in this development, offering a regulatory framework conducive to innovation[5].
Technology and lifestyle are intertwined in the digital leap forward of Kazakhstan's financial landscape, as the central bank digital currency, the digital tenge, combines the security and stability of government-backed cash with the convenience of electronic money, offering users a secure, cheap, and safe way to make digital payments using their banking applications or debit cards. With open banking and a programmable digital tenge, the nation's economy is expected to witness increased efficiency, transparency, and inclusivity, shaping a modern lifestyle that embraces technological advancements.
