The Rise of Digital Currencies: Kazakhstan’s National Currency

34

Kazakhstan’s National Bank has introduced a digital analogue to the national currency, the tenge, to streamline financial transactions and reduce corruption. The Digital Tenge (DT) is a unique payment tool that is centrally issued by the National Bank, unlike cryptocurrencies. The DT is designed to enhance transparency in government spending by allowing money in the budget to be marked for specific uses and disappearing after expenditure.

The government will not use the platform to track personal money movement, but holders of the currency will have control over its usage. Parents can program DTs to control their children’s spending, including setting prohibitions on the purchase of cigarettes and alcohol. DT will also be available for offline transactions, making it particularly useful in areas with weak or non-existent mobile signals. The DT is expected to be a valuable tool for enhancing transparency in government spending.

Kazakhstan’s National Bank is implementing a digital currency, the digital tenge, based on China’s experience of implementing its digital yuan. The project, which began two years ago, aims to expand its scope to include cross-border transactions by 2025. The public in Kazakhstan is familiar with using financial technology products for transactions, with local lender Kaspi Bank dominating the market with its e-wallet app.

However, tax authorities have faced challenges, as market retailers were able to avoid paying sales taxes by identifying money transfers as “financial aid.” In 2021, legislation required traders and taxi drivers to split their mobile cash transfers between person and business accounts and banks to disclose information on cash transactions to tax authorities. Critics argue that the digital tenge project is designed by authorities to monitor spending patterns, despite protestations about privacy.