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    Kazakhstan Regulator Bars 980 Crypto Firms for Non-Registration

    In Kazakhstan, numerous digital asset exchanges found themselves blocked by the Financial Monitoring Agency (FMA) for flouting regulatory protocols by providing trading services to users without the necessary approval. A total of 980 exchanges were halted from operating in the country.

    As part of newly enacted legislation, the financial regulator announced on December 7, stating that it had taken action against close to 1,000 cryptocurrency trading platforms to suppress unregulated activities within the industry.

    During a gathering of the Eurosian Group in China, FMA chairman, Ruslan Ostroumov, made a startling revelation regarding the initiation of nine separate investigations into cryptocurrency companies suspected of engaging in money laundering activities. The country’s relentless efforts have uncovered an astonishing sum of $36.7 million believed to have been illicitly laundered through these operations.

    In response to a surge in illicit activities such as money laundering, scams, and cyber attacks on financial systems, governments are intensifying their initiatives to safeguard the interests of investors. Kazakhstan has also taken proactive measures by introducing legislative measures aimed at averting such incidents from happening within its borders.

    Popular and smaller firms can be found within the restricted virtual asset exchanges, as the regulatory authority simultaneously grants licenses and takes action against non-compliant companies.

    In November, Coinbase, an exchange with ambitious global expansion goals, was impeded when government authorities issued an order that led to its suspension. The Ministry of Digital Development alleged that the company had violated regulations related to digital assets during its operations.

    Despite the restrictions imposed on Coinbase, alternative exchanges such as Binance, Bybit, and Xignal emerged without any hindrance.

    Kazakhstan wants full compliance

    In the wake of the tumultuous events witnessed in 2022, with the advent of severe cyber attacks targeting valuable digital assets, there emerged a notorious downfall of the Terra Network as well as the abrupt disintegration of FTX during that same year. As a consequence, regulatory bodies embarked on an intensified endeavor to enact localized legislation, mandating the registration and guaranteeing complete adherence to regulations before any digital asset services could be provided. In addition, some entities also pursued broader regional partnerships to address these pressing concerns.

    Kazakhstan’s Digital Assets Law, established in February, firmly forbids any trading or associated endeavors lacking the necessary regulatory approval, as mandated by the Astana International Financial Center (AIFC), an economic jurisdiction within the nation.

    Analysts have expressed concerns about the negative impact on the broader industry and mining sector in Kazakhstan due to the country’s implementation of strict measures, despite the positive effects it brings in safeguarding investors and users against potential fraudulent activities.

    Miners hurt by new legislation

    Amidst soaring energy costs burdening the power grid, the Head of State took action in February by enacting legislation that imposes restrictions on the electricity consumption of digital asset miners within the nation.

    As the nation sought to establish regulations for Bitcoin mining operations and combat illicit mining activities, the decision arose from the overwhelming energy consumption associated with these operations.

    According to regulations, miners are only permitted to access energy from the national grid during periods of excess supply. This surplus energy is then allocated to licensed operators, along with specific tax concessions for miners. However, miners who choose to utilize renewable energy sources are not subject to the energy limitations imposed.

     Frequently Asked Questions:

    The decision implemented by the Financial Monitoring Agency (FMA) in Kazakhstan to restrict 980 cryptocurrency businesses, what was the rationale behind this action?

    The FMA’s decision targeted digital asset exchanges operating in Kazakhstan and providing trading services to users without obtaining the required regulatory approval.

    What prompted the financial regulator to declare the ban, and at what point in time was it announced?

    On December 7, an announcement was made to ban effect due to the failure of almost 1,000 cryptocurrency trading platforms to register. This ban is one component of a larger strategy aimed at controlling unregulated practices within the cryptocurrency sector, as detailed in newly enacted laws.

    In this year, what is the number of money laundering investigations that Kazakhstan has commenced against cryptocurrency companies?

    In Kazakhstan this year, a total of nine ongoing money laundering investigations have been initiated against specific cryptocurrency companies, revealed Ruslan Ostroumov, the chairman of FMA.

    How much money is believed to have been laundered using illicit cryptocurrency activities?

    The FMA claims that an estimated sum of $36.7 million has been funneled through illicit cryptocurrency activities in a suspected money laundering scheme.

    What was the reasoning behind the government’s decision to restrict Coinbase in November, and is this restriction impacting other exchanges?

    Coinbase faced a temporary suspension in November due to accusations of violating regulations surrounding digital assets. Meanwhile, different platforms such as Binance, Bybit, and Xignal, remained unaffected by these restrictions.

    How has Kazakhstan addressed the cryptocurrency sector through legislative actions?

    In February, the implementation of the Digital Assets Law in Kazakhstan mandated that The Astana International Financial Center (AIFC) issue national licenses specifically for trading and its associated practices.

    What steps has the government taken to tackle apprehensions associated with the expansion of the cryptocurrency realm, specifically focusing on the mining domain?

    Kazakhstan took action to address energy-related issues and pressure on the power system by introducing a measure that restricts the amount of electricity consumed by digital asset miners. The objective behind this ruling was to establish control over Bitcoin mining activities, incorporating provisions for licensed operators, while also granting exemptions to those miners who rely on renewable energy sources.

    What led the government to implement measures to control the consumption of electricity by digital asset miners?

    Bitcoin miners and illegal mining activities have caused a significant surge in energy consumption, prompting the government to make a decision. Particularly during times of expensive energy, the authorities are determined to establish regulations that will effectively govern these practices and ensure responsible energy usage.

    What measures has Kazakhstan implemented to safeguard investors and users within the cryptocurrency sector?

    To safeguard investors from fraudulent activities and scams within the cryptocurrency domain, Kazakhstan has undertaken the implementation of laws and regulations such as the Digital Assets Law. These measures require digital asset services to undergo thorough registration and adhere to complete compliance before they are permitted to operate, forming a crucial part of comprehensive initiatives.

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