Kazakhstan’s digital currency project
The largest crypto asset (virtual currency) exchange Binance and the Central Bank of Kazakhstan released a joint report on cryptocurrencies and DeFi (decentralized finance) on the 3rd. Kazakhstan’s central bank digital currency (CBDC) is in the pilot stage.
Binance will help Kazakhstan by providing an environment for its own blockchain, BNBChain, to test CBDC integration.
Kazakhstan will formulate a strategic roadmap for building a digital financial infrastructure in 2020. This included plans for a “digital tenge,” a digital version of the legal tender tenge.
According to the report, Digital Tenge is already in the process of setting up a controlled environment and conducting pilot tests with real consumers and merchants. The Binance BNB Chain team and the Central Bank of Kazakhstan are currently testing the integration of CBDC into a public decentralized blockchain to bring the traditional banking system closer to the cryptocurrency ecosystem.
What are CBDCs
A digital currency issued by the central bank of a country or region. It stands for “Central Bank Digital Currency”. The big difference from virtual currency is that CBDC is a legal tender. While cost reduction and efficiency improvement can be expected in currency management and settlement, there are many issues to be considered, such as protection of personal information and privacy, security measures, and impact on the financial system.
Advocating a partnership between DeFi and traditional finance
The report also pointed out commonalities between CBDC and DeFi:
The DeFi ecosystem is maturing, and there are common advantages with CBDCs that we believe will continue to grow. At first glance, DeFi and central banks seem to have different goals, but they both have some common goals.
Financial inclusion, reducing transaction costs, protecting end-user privacy, and even financial stability are becoming increasingly important for DeFi.
He also argues that traditional finance and DeFi need to coexist and work together to provide consumers with more comprehensive, cost-effective, convenient and fast services.
Binur Zhalenov, Head of the Development Center for Payments and Financial Technology at the Central Bank of Kazakhstan, commented:
We believe in Kazakhstan’s potential for blockchain technology and its new markets. We are currently witnessing many new opportunities emerging from traditional finance and DeFi, as well as regulatory and market synergies.
We aim to create a sound and balanced regulatory environment that unleashes the innovative potential of cryptocurrencies and digital assets in general.
What is DeFi (decentralized finance)?
Refers to financial services or systems that utilize blockchain and are performed in the absence of a central administrator. Abbreviation for “Decentralized Finance.” DeFi financial services include stablecoin issuance, currency lending, and cryptocurrency exchanges. Many platforms use the Ethereum blockchain.
Signed memorandums of understanding with multiple ministries
Besides the central bank, Binance has also signed memorandums of understanding with several Kazakhstan ministries.
A memorandum of understanding will be signed with the Financial Supervisory Agency in October 2022. Implement cooperation in the areas of cryptocurrency circulation and illicit finance. For example, we will cooperate in identifying and freezing assets for the purpose of money laundering and terrorism financing.
We are also working with the Ministry of Digital Development, Innovation and Aerospace Industries to explore opportunities to integrate banking sector infrastructure into cryptocurrency markets and promote distributed ledger technology.
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