Kazakhstan's foray into the world of central bank digital currencies (CBDCs) has seen significant success with the digital tenge, culminating in a month-long pilot project. The National Bank of Kazakhstan and the National Payment Corporation of Kazakhstan (NPCK) have declared the digital tenge pilot a triumph, leading to ambitious plans for 2024.
Diverse Applications During the Pilot
The digital tenge showcased its versatility during the pilot phase, demonstrating its potential across various sectors. One notable application involved providing schoolchildren with free lunches in Almaty through the Onay card, originally designed for the local transit system. The NPCK collaborated with the Kazpost postal system operator to facilitate these transactions, offering a practical use case for the CBDC.
In addition to catering to school lunches, plastic cards were issued to focus groups by four local banks in collaboration with major financial players Visa and Mastercard. These cards enabled users to make purchases both in-person and online, as well as withdraw cash from ATMs. Merchants had the flexibility to accept digital tenges directly or convert them to "non-cash" tenges, showcasing a level of interoperability previously unprecedented for a CBDC. This interoperability extended beyond Kazakhstan's borders, marking another milestone for the digital tenge.
Diverse Use Cases
Beyond daily transactions, the digital tenge found applications in cross-border payments via SWIFT and the issuance of CBDC-backed stablecoins on platforms like Binance and KASE. The CBDC was also utilized for tokenizing gold, collecting value-added tax through smart contracts, and testing a move-to-earn application. These diverse use cases highlight the adaptability and potential of the digital trend in various financial scenarios.
Goals and expansion plans for 2024
Buoyed by the success of the pilot, the NPCK and the National Bank of Kazakhstan have outlined ambitious goals for 2024. One key objective is to increase the number of intermediary banks, fostering a more extensive network for digital tenge transactions. Developing decentralized finance (DeFi) applications is also on the agenda, aligning with the global trend of integrating blockchain into financial services.
Offline transactions at scale represent a crucial goal for 2024, aiming to enhance financial inclusion by addressing connectivity challenges in certain regions where internet access is limited. Simultaneously, the NPCK and the National Bank of Kazakhstan aim to bolster participation in cross-border payment projects, such as their role as observers in Project mBridge.
On the regulatory front, the entities plan to implement necessary legislative and regulatory frameworks, ensuring the seamless integration of the digital trend into the financial ecosystem. Security enhancements and improvements in processing speed are also emphasized to fortify the digital tenge's reliability.
Assurance of User Privacy
Amid growing concerns about user privacy in the age of digital currencies, NPCK CEO Binur Zhalenov emphasized in a recent interview that the digital tenge would not be exploited for surveillance purposes. This assurance aligns with the broader principles of user privacy and data protection, aiming to build trust in the adoption of digital technology.
Kazakhstan's digital tenge has not only completed a successful pilot but has set its sights on an ambitious and multifaceted expansion in 2024. The achievements of the pilot phase, coupled with the diverse applications explored, position the digital tenge as a promising player in the evolving landscape of CBDCs. As the NPCK and the National Bank of Kazakhstan continue to navigate the intricate regulatory, technical, and business aspects, the digital tenge appears poised to contribute significantly to the country's financial innovation and inclusion goals.
(DEREK ANDERSEN, COINTELEGRAPH, 2023)