Kazakhstan’s Central Bank Seriously Considers Issuing Its Own Bitcoin

Rage Comment : After the Central Bank of Kazakhstan adopted the free floating exchange rate system, the sharp drop in oil prices has further aggravated the continued depreciation of the country's legal currency exchange rate. The shortage of national currency reserves has also brought a significant impact on the stability of the country's financial market. The confidence of domestic enterprises and the public in the central bank has plummeted. The central bank hopes to consolidate its fiscal power and increase economic diversification by issuing digital currency.

Translation: Nicole

The intervention of the Central Bank of Kazakhstan will help stabilize the situation, although rebuilding public trust after three rounds of currency devaluation will be a challenge. Moreover, consumers do not trust the central bank because financial difficulties have brought so much negative attention to financial institutions.

Judging from the trend, central banks around the world are preparing to issue digital currencies. Regardless of whether this method will allow consumers to accept digital currencies, consumers may still prefer cash or credit card payments. Although it is not yet known whether the Central Bank of Kazakhstan will issue digital currencies, the time to realize this idea may be much earlier than we expected.

Kazakhstan's Central Bank has lost consumers' trust

Like all struggling countries, Kazakhstan's economy is closely tied to the US dollar. But the recent economic downturn has hit stock markets around the world, and coupled with falling oil prices, the local currency's exchange rate with the US dollar has made things worse. Unfortunately for Kazakhstan, it has lost a lot of ground in the past few years.

The intervention of the Kazakh central bank will help stabilize the situation, although rebuilding public trust after three currency devaluations remains a challenge. Moreover, consumers do not trust the central bank because of the negative attention that financial difficulties have brought to financial institutions.

But there is another concern. The central bank does not have any reserves of tanzi (Kazakh currency unit). Up to 80% of consumers' deposit funds are in foreign currencies, including US dollars, euros and other currencies. The same is true for the funds of companies and enterprises, although the threshold has been lowered by about 60%. However, this has not brought more confidence in the Kazakh currency in the future.

Since every country wants to launch its own digital currency, financial players also need to change their mindset. However, most people regard this plan as a trivial matter. First of all, more and more people in the banking field are advocating this matter. Not only will the central bank have full control over the money supply, but financial players will also guide the circulation of money.

However, the Central Bank of Kazakhstan may delay implementing this idea until the second half of the year. The Central Bank of Russia is said to be planning to issue a digital currency, the ruble, and hopes to implement these ideas in June 2016. It all depends on how government officials view the proposal, and the neighboring country may carefully study this plan in the next few years.

The benefits of issuing a national digital currency are pretty easy to explain:

Consumers and businesses will have faster and cheaper transactions, and the Central Bank of Kazakhstan will not have to give up any fiscal power. In fact, the central bank will be more powerful because they will know where every virtual currency Tanzi is and who is holding it at any time.

Moreover, venturing into the world of digital currencies could give Kazakhstan and Azerbaijan a new tool to diversify their national economies. Until now, these countries have been heavily dependent on exporting oil and other natural resources, leaving little room for diversification. Banks could solve these problems through virtual currencies, but it remains to be seen how to turn this into reality.