Kazakhstan’s National Bank has issued a digital analogue to the national currency, the tenge, as part of a stated attempt to streamline everyday financial transactions and reduce corruption.
Speaking at a press event on November 21, National Bank deputy chairman Berik Sholpankulov described the Digital Tenge, or DT, as “a new payment tool that meets the realities and challenges of the digital innovative economy.”
While sharing some features with cryptocurrencies, DT is distinct in important ways. Most notably, it is centrally issued by the National Bank rather than circulating within an open and unregulated blockchain network.
Binur Zhalenov, head of the National Payment Corporation, a subsidiary of the National Bank that is responsible for development of DT, talked up the digital platform’s potential for enhancing transparency in government spending.
“Money in the budget in Digital Tenge can be marked for specific uses. After the expenditure has taken place, this marking will disappear,” Zhalenov said. “This will … ensure public and government control over budget spending.”
Zhalenov sought to head off concerns about privacy by insisting that the government would not use the platform to track the movement of personal money of the public. Holders of the currency will, meanwhile, be able to control and vet how it is being used, he said.
By way of an example, Zhalenov said parents would be able to program DTs to control their children's spending, including by setting prohibitions on the purchase of cigarettes and alcohol.
The creator of DT say it will also be available for use in transactions when either the buyer or seller, or both, are offline. This is a particularly appealing option in areas of the country where mobile signals are weak to non-existent.
Developers of the digital currency said that they based their project on the precedent of China’s experience of implementing its digital yuan. Zhalenov, who claims to already be receiving his salary in DT, said Kazakhstan may go down the Chinese route of using biometric data, such as fingerprints, for effecting payments.
The National Bank began its efforts to roll out the digital tenge around two years ago, initially focusing on security issues. Last year, it tested the platform together with local financial institutions. The plan is to expand the present scope of the currency to include functions like cross-border transactions by 2025.
The public in Kazakhstan is already well-used to using financial technology products for even the simplest transactions. Local lender Kaspi Bank has all but cornered the market for digital transactions with its e-wallet app.
This has proven something of a headache for the taxman, though. Market retailers, for example, were at one stage able to freely dodge paying sales taxes by having buyers identify money transfers as merely “financial aid.”
Under legislation adopted in 2021, however, traders and taxi drivers, who have customarily done much of their business in the shadows, fiscally speaking, are required to split their mobile cash transfers between person and business accounts. Bank were obliged to divulge information on cash transactions to the tax authorities under that same legislation.
Notwithstanding protestations about privacy, cynics may be inclined to suspect that the digital tenge project is being designed by the authorities to give themselves another means by which to keep tabs on who is spending what, where and when.
Almaz Kumenov is an Almaty-based journalist.