Full Steam Ahead for Crypto in the CIS – but Instigator Has Cold Feet
The heat is on in the CIS as member states rush to pass cryptocurrency and blockchain-friendly legislation – and attract major international investment.
Last year, Belarus surprised the world when it announced that, as of the end of March, it would be introducing sweeping measures to legalize cryptocurrencies, initial coin offerings (ICO) and smart contracts. The new law will also offer visa waivers for international fintech startup staff – as well as personal income tax exemption until 2023.
But now other regional players, including Armenia and Uzbekistan, want in on the act. And ironically, just as the CIS’ crypto drive gets into full swing, Kazakhstan, one of the area’s prime movers, appears to be having second thoughts.
Belarus arrived late to the CIS crypto game – prior to the end of last year the country seemed to have very little interest in anything cryptocurrency or blockchain-related. Its president, Alexander Lukashenko, has been in power since the collapse of the Soviet Union, and the country’s suffocating bureaucracy has long been seen as an obstacle to any sort of business or technical progress. Lukashenko, a former collective farm head who voted against the dissolution of the Soviet Union, once called the internet “a pile of garbage.”
But Lukashenko has had a radical change of heart – and is hoping to make up for lost time with a enthusiastic approach to fintech.
Indeed, if Belarus’ intention was to turn heads in the CIS, it appears to have succeeded in a big way. A state-owned Russian broadcaster Russia-24 reported that mining centers began springing up all over the country “from the moment Lukashenko’s declaration was made public” – with all now waiting on tenterhooks for March 28 to arrive.
Ground has also been broken on the Great Stone industrial park, a joint Chinese-Belarusian incentive whose resident companies will be exempted from income tax for 10 years (and will not have to pay property tax until 2062). Facilities at the park will include cryptocurrency mining centers, fitted with high-power cooling equipment.
The crypto drain from Russia, whose own cryptorouble project could actually end up limiting public access to cryptocurrencies, has been palpable.
A CEO of a Minsk-based mining consultancy, told Russia-24 that half of his new client base is from Russia. Also, according to media reports, “two or three fintech companies” are looking to set up in Belarus every day, including “many from Russia and the Baltic States.”
However, Russia has started to draft cryptocurency investor-friendly legislation, Vedomosti reported on February 28.
In fact, Belarus’ volte face has seemingly sparked a flurry of feverish activity in the CIS. Armenia is preparing to legalize cryptocurrency mining as it works on a massive 50mW mining center. The center will be fitted with Bitmain, Canaan and EBANG mining equipment, and power will be supplied by “the largest thermal power plant in Armenia,” the Hrazdan TPP, which boasts a capacity of 1,100mW. Operator Ecos-Am has set up a sales office in Moscow – keen to capitalize on Russia’s current love-hate relationship with its own mining industry.
Armenia’s proposed new legislation would legalize mining for anyone aged over 18 in the country, and would also exempt mining operations “from any type of taxes” until December 31, 2023.
Silicon Valley is also keen on Armenia. Former Lead Data Scientist at Facebook Hamdan Azhar has enthused, “We want to do a lot of things in Armenia, including supporting the economy and making this country the world center of cryptocurrency. The government is forward looking. We think Armenia should be a cryptocurrency hub.”
Other players looking to catch up with the breathtaking speed of crypto progress in the CIS include Uzbekistan, whose president Shavkat Mirziyoyev has recently issued a decree that could see bitcoin and altcoins become legal tender by the end of the year.
Mirziyoyev has tasked the country’s Central Bank to work with the technology, finance and economy ministries on the development of a legal framework for cryptocurrencies in Uzbekistan. The legislation could pass into law by September. The country’s new Mirzo Ulugbek Innovation Center will also have a special blockchain incubator unit. In February, the head of Belarus’ own crypto-hub project, the High-Tech Park, visited Tashkent to talk fintech with some of Uzbekistan’s leading tech influencers.
Kyrgyzstan, meanwhile, is still working on plans to launch its own cryptocurrency. The currency, which could be used in government transactions, will be backed by the state’s gold reserves and is being developed in conjunction with Crypt NN, a Russian blockchain startup based in Nizhny Novgorod.
An ironic spanner in the works for all this super-fast paced crypto-progress has come from an unlikely source. It appears that CIS’ biggest fintech player, Kazakhstan, might be getting cold feet amid all the regional crypto fever.
Belarus, Uzbekistan and Armenia almost certainly took their “fintech park” inspiration from Kazakhstan’s Astana International Financial Center (AIFC) that has seen the likes of Deloitte, one of the "Big Four" accounting organizations, and Waves, a platform for digital assets, set up bases in the country. Waves’ CEO Sasha Ivanov called Kazakhstan “the Singapore of blockchain.”
The government last year announced it was working on a state-supported digital fiat, signing a Memorandum of Understanding with a Maltese blockchain startup who will provide the underpinning technology for the currency. The move prompted the AIFC’s head, Kairat Kelimbetov, to say, “Blockchain and cryptocurrencies are entering the mainstream of today’s economic reality.”
In February, though, the National Bank announced that cryptocurrencies would “not be accepted as a means of payment in Kazakhstan,” and some believe that up to 70% of Kazakhs are opposed to legalizing bitcoin and altcoins.
Yeset Butin, chairman of the government-private sector Kazakhstan Association of Blockchain and Cryptocurrency think tank, warned that regulatory measures could be in the pipelines.
Butin said, “We need to establish a set of prudential standards. The number of suspicious cryptocurrency-related projects is growing rapidly. Kazakh citizens are increasingly getting caught out by professional scammers.”
Intriguingly, Butin also seems to hint that much still remains in the air when it comes to the matter of cryptocurrency regulation in a country that has invested so much into developing its now-enviable blockchain infrastructure.
He told the audience at a recent blockchain conference in the country, “In order for the state to act, it must have a clear opinion on cryptocurrencies. But, quite honestly, the state is yet to form a clear opinion on the matter.”