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In 2024, Kazakhstan cracked down on 36 illegal crypto exchanges. In comparison, the move is a record 96.3% down from 2023, showing that Kazakhstan's government is taking a serious step towards regulating the market, and curbing illegal processes like money laundering.
Kazakhstan's Financial Monitoring Agency carried out the operation. Other state bodies, including the National Security Committee and the Ministry of Culture and Information, also were behind the takedown.
Illegal cryptocurrency exchanges do not have the licenses required and are primarily used for illegal financial transactions. They do not follow mandatory customer identification or suspicious transaction reporting procedures. Such platforms become highly attractive to cybercriminals, money launderers, and drug traffickers. Kazakhstan's FMA has reported that such exchanges are a perfect means for transferring unverified funds between fiat and cryptocurrency.
The total turnover of the 36 illegal exchanges closed in 2024 was approximately 60 billion Kazakhstani tenge, or $112.8 million, and the authorities also confiscated assets valued at approximately 2.5 billion tenge, or $4.8 million. That gives an idea of the scale of illegal operations running under the radar.
Kazakhstan's regulatory actions are also quite vast. According to the data up to 2023, FMA has blocked access to as many as 980 unlicensed exchanges. It has also opened nine investigations related to illegal exchange operations and money laundering schemes. Already, over 3,500 illegal exchanges have been shut down. That is part of a more comprehensive policy on anti-financial crime and promoting safe trade with cryptocurrencies in Kazakhstan.
The agency has also been targeting cryptocurrency pyramid schemes. Two such were found during the 2024 crackdown. Litigation helped return $545,000 to the victims and freeze another $120,000. That shows how Kazakhstan is committed to the safety of its citizens from fraudulent crypto operations.
Despite the constant aggressiveness in how the authorities regulate illegal exchanges, Binance, Bybit, and Upbit are running fully licensed in Kazakhstan. This is because these exchanges have managed to obtain operational licenses from the Astana Financial Services Authority (AFSA). The country distinguishes between a legitimate player and an unlicensed, illicit operator.
Although the present operation has managed to eradicate some of the illegal exchange, it underscores the need for a well-defined and all-inclusive regulatory framework. This move by FMA will bring a stricter view of monitoring, which will, in turn, ensure greater safety and security for users and traders.
Another strong highlight of the country is the CBDC it is designing, known as digital tenge. However, the project started only in February 2023, and the system is expected to be fully operational by 2025. It aims to modernize Kazakhstan's financial systems and make payment transactions more secure with better traceability. Other focus areas are in international collaborations related to developing more advanced tools in tracking crypto transactions that further reduce criminals' capabilities of taking advantage of the system.
In this program, the country has partnered with Visa and Mastercard in local bank collaborations so that the digital tenge becomes part of a regular payment cycle. As the use of mobile payments increases through the likes of Apple Pay and Samsung Pay, the use of digital tenge will allow international availability where users can make smooth over-the-border payments in digital currencies.
Future: Implication for Crypto Regulation
Kazakhstan's decision to investigate and close all the unauthorized cryptocurrency exchanges might further have a lot of implications for the global market. Countries with soft regulations will feel increased pressure to harden the controls to gain more confidence and avoid being a haven for money laundering and fraud. This could result in increased compliance requirements for legitimate crypto exchanges, but it also allows them to take advantage of the opportunity to operate in a safer and cleaner environment.
In the long term, regulatory actions in Kazakhstan and other countries may lead to a more consolidated crypto market where only those exchanges that meet the high standards will survive. This might eventually lead to a safer space for users but is also challenging for new entrants into the market, who might face higher compliance costs and stricter scrutiny.
The crackdown on illegal cryptocurrency exchanges in Kazakhstan is part of the general worldwide trend toward regulating the crypto space more effectively. Dismantling the illicit exchanges may ensure the country's financial ecosystem is preserved from criminal activities and that the country is a hub for legal crypto trading. With changing compliance norms, improving regulatory standards, and tightening overall regulatory requirements, the crypto exchange landscape keeps changing views on exchange sites, compliance, safety, and transparency. It promises to mold the future of cryptocurrency trading in the global economy.
