On-shore VASP in Kazakhstan

AIFC Financial Services Authority (AFSA): The independent regulator of the AIFC, responsible for licensing, supervision, and enforcement of financial services, including virtual asset activities.

License Type: Operating a Digital Asset Trading Facility (DATF).

License Type: Providing Custodian (Digital Assets) services.

License Type: Providing Payment Services Provider (PSP) services.

Broker (Digital Assets): Acting as an agent for clients in buying and selling digital assets.

Dealer (Digital Assets): Dealing in digital assets as a principal, either buying or selling for one's own account.

Must be incorporated or established as a legal entity within the AIFC.

Maintain a physical office presence in the AIFC.

Have key personnel (e.g., CEO, Compliance Officer) primarily based in the AIFC.

Base Capital: This varies significantly based on the type and scope of the license.

Digital Asset Trading Facility (DATF): Typically USD 300,000 (or KZT equivalent) for non-dealing DATFs. If the DATF also acts as a Dealer, higher capital may be required.

Custodian (Digital Assets): Typically USD 300,000 (or KZT equivalent).

Payment Services Provider (PSP): Varies depending on the specific payment services and tiers of authorization, ranging from USD 50,000 to USD 200,000 (or KZT equivalent) for higher-tier PSPs.

Ongoing Capital: Firms must maintain capital sufficient to cover their regulatory capital requirements (base capital plus operational risk requirements) at all times.

Adherence to AIFC AML Rules, which are aligned with FATF (Financial Action Task Force) recommendations.

Requirement: As a UN member state, Kazakhstan is obligated to implement all UN Security Council resolutions imposing sanctions. These are universally binding.

Compliance: VASPs must screen customers and transactions against the UN Security Council Consolidated List (individuals and entities associated with terrorism and proliferation of weapons of mass destruction, and other sanction programs).

Requirement: While OFAC sanctions are primarily U.S. law, their extra-territorial reach is significant. Any VASP that deals with U.S. persons (citizens, residents, entities), uses U.S. financial systems (e.g., for USD transactions), or handles U.S.-origin technology or services, falls under OFAC's jurisdiction. Given the global nature of crypto, avoiding a U.S. nexus can be challenging.

Compliance: VASPs must screen against OFAC's Specially Designated Nationals And Blocked Persons List (SDN List) and other relevant sanctions lists specific to programs (e.g., Russia/Ukraine, Iran, North Korea).

Requirement: Similar to OFAC, EU sanctions have extra-territorial implications for any entity or individual doing business with EU persons, entities, or utilizing EU financial infrastructure. Many international crypto exchanges and platforms have an EU presence or serve EU customers.

Compliance: VASPs must screen against OFAC's Specially Designated Nationals And Blocked Persons List (SDN List) and other relevant sanctions lists specific to programs (e.g., Russia/Ukraine, Iran, North Korea).

Law of the Republic of Kazakhstan "On Counteracting Legalization (Laundering) of Criminal Proceeds and Financing of Terrorism" (No. 191-IV dated August 28, 2009, as amended): This is the primary AML/CFT law. It designates the Financial Monitoring Agency (FMA) as the competent authority and outlines the obligations of "financial organizations" and other reporting entities (which, under FATF standards, includes VASPs). It requires reporting entities to identify customers, monitor transactions, and report suspicious activities, including those related to terrorism financing and proliferation, which often involves sanctions screening.

Law of the Republic of Kazakhstan "On Counteracting Legalization (Laundering) of Criminal Proceeds and Financing of Terrorism" (No. 191-IV dated August 28, 2009, as amended): This is the primary AML/CFT law. It designates the Financial Monitoring Agency (FMA) as the competent authority and outlines the obligations of "financial organizations" and other reporting entities (which, under FATF standards, includes VASPs). It requires reporting entities to identify customers, monitor transactions, and report suspicious activities, including those related to terrorism financing and proliferation, which often involves sanctions screening.

Financial Monitoring Agency (FMA): The FMA is Kazakhstan's Financial Intelligence Unit (FIU) and the primary body responsible for enforcing AML/CFT laws, including monitoring compliance with international sanctions.

Mandatory Segregation: Licensed custodians are required to segregate client digital assets from their own proprietary assets. These assets must be clearly identifiable as client assets.

Record-Keeping: Detailed and accurate records of client assets, including ownership and transaction history, must be maintained.

Capital Requirements: Licensed firms must meet specific minimum capital requirements (financial resources) based on the nature and scale of their business, as detailed in the Prudential Rules. This serves as a buffer against operational losses.

Demonstration of "fit and proper" criteria for all significant shareholders, directors, and senior management (background checks, experience, integrity).

General Republic of Kazakhstan: The National Bank of Kazakhstan has historically maintained a cautious stance, stating that cryptocurrencies are not legal tender and are generally viewed as digital property or assets. The use of cryptocurrencies for payments is prohibited outside the AIFC.

Astana International Financial Centre (AIFC): The AIFC operates under its own jurisdiction based on English common law and has a more progressive approach to digital assets. Within the AIFC, specific regulations allow for the operation of digital asset exchanges and other crypto-related activities under the supervision of the AIFC Financial Services Authority (AFSA). Here, digital assets are recognized as a specific class of assets.

VAT Exemptions: AIFC participants are generally exempt from VAT on the supply of financial services and certain other specified activities within the AIFC. This could extend to qualifying digital asset services.

Potential Exemptions: The AIFC offers a more attractive tax regime. Participants (legal entities registered within the AIFC) may be exempt from CIT on certain income, including income from financial services and investment activities, for a period of up to 50 years. This could potentially include profits from qualifying digital asset activities, depending on the specific registration and nature of the activity. Individuals working in the AIFC also enjoy tax benefits. It is crucial to verify the specific conditions for these exemptions with the AFSA and a tax advisor.

Regulator Name: Agency of the Republic of Kazakhstan for Financial Monitoring (AFM), in cooperation with the Ministry of Energy, National Security Committee, and local authorities.

Entity Targeted: Numerous unregistered cryptocurrency mining farms operated by various individuals and organizations across the country. Violation Type: Unlicensed business activity, illegal electricity consumption, tax evasion, sometimes money laundering, and operating outside the legal framework for crypto mining. Outcome: Shut down of operations, seizure of equipment (hundreds of thousands of mining devices), criminal charges against operators, and significant administrative fines. While individual penalty amounts for each entity are not publicly disclosed, the total economic impact and asset seizures were substantial. For instance, in 2022 alone, the AFM reported stopping 51 illegal mining farms and confiscating equipment worth billions of tenge.

Entity Targeted: Operators and websites of unregistered cryptocurrency exchanges and peer-to-peer trading platforms. Violation Type: Unlicensed financial activity, facilitation of illegal financial operations (e.g., fraud, money laundering), violation of financial regulations. Penalty Amount: Not specified as a direct fine in publicly available reports. Outcome: Blocking of website access, criminal charges against individuals involved, seizure of funds (if traceable).

Outcome: Websites were blocked, and criminal investigations were launched against individuals involved in operating these platforms. This reinforces Kazakhstan's stance against any crypto trading outside the regulated AIFC framework.

Entity Targeted: Individuals and organized groups operating pyramid schemes and financial frauds that solicited investments in cryptocurrencies. Violation Type: Financial fraud, creation and promotion of financial pyramids, illegal attraction of funds, money laundering. Penalty Amount: Not specified as a single fine, but involves restitution to victims, asset forfeiture, and criminal sentences (imprisonment).