As a researcher with extensive experience in the field of central bank digital currencies (CBDC), I find Kazakhstan’s initiative to be nothing short of groundbreaking and innovative. Having closely followed the development of CBDCs globally, it is evident that Kazakhstan is taking significant strides towards leveraging the benefits of programmability in government processes and financial operations.
Through a recent initiative, Kazakhstan is testing a new trial involving their central bank’s digital currency (CBDC). This project aims to demonstrate the functionality and flexibility of the digital currency’s programming features.
Collaborating with the Ministry of Finance, the National Bank of Kazakhstan (NBK) showed substantial progress in streamlining the process for refunding Value-Added Tax (VAT), leading to more efficient handling.
CBDC to get VAT back faster
As per Binur Zhalenov’s LinkedIn post, which serves as the NBK chief digital officer, transactions between businesses have been marked with VAT using the digital tenge CBDC. This has significantly shortened the time exporters wait for refunds from 70-75 days to just 10-15 days, aiming to provide instant reimbursement in the not-too-distant future.
The increased efficiency stems from the removal of manual verifications carried out by the tax authority of the State Revenue Committee. Moreover, Zhalenov mentioned that there are plans for trials to incorporate the digital tenge in public procurement, funding projects from the national sovereign wealth fund, and providing investment incentives. In his words:
“These initiatives demonstrate the versatile applications of programmable money in enhancing government processes and financial operations.”
Currently, approximately $81,800,000 worth of Kazakhstan’s currency, the tenge, is being used digitally as per Zhalenov’s information.
Programmability at the heart of the digital tenge
Since February 2023, Kazakhstan has been developing its Central Bank Digital Currency (CBDC). This initiative kicked off with an initial pilot program. The concept of programmability was integral to the CBDC from the outset, as it was viewed as a powerful tool for combating corruption.
In late 2023, the structure of the Interbank Settlement Center was transformed to become the National Payment Corporation. This new entity was tasked with building an infrastructure for Central Bank Digital Currency (CBDC). In November 2023, a digital tenge pilot program was initiated, showcasing both retail and wholesale applications.
Banks located within the region started offering Visa and Mastercard debit cards connected to Central Bank Digital Currency (CBDC) accounts. Some of the commercial applications involved releasing a digital version of the national currency (tenge), tokenizing gold, and facilitating international transactions using SWIFT.
To demonstrate the programmable nature of the Central Bank Digital Currency (CBDC), it was employed in paying for the construction of a rail line from central Kazakhstan to the Chinese border. The digital tenge were allocated strictly to organizations that had completely met their contractual obligations.
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2024-10-31 00:50