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cryptocurrency exchanges bold
cryptocurrency exchanges bold
Many companies come to Kazakhstan searching for crypto-mining heaven, but Kazakhstan is not just an endless source of electricity for mining enthusiasts. Recently, Kazakhstan has made tremendous efforts to benefit from crypto hunger worldwide and ease miners' business lives. At the end of June 2022, the Government of Kazakhstan officially launched a new pilot project between banks in Kazakhstan and crypto exchanges licensed in Astana International Financial Centre [1] (the “AIFC”). The pilot project is managed by a working group consisting of the AIFC Financial Services Regulatory Committee, the National Bank, the Financial Market Regulation and Development Agency, the Financial Monitoring Agency and the Ministry of Digital Development, Innovation and Aerospace Industry. The primary purpose of this project is to assist miners in exchanging crypto for fiat and introduce the crypto world to regular people and businesses. Currently, two crypto exchanges, ATAIX Eurasia and Biteeu Eurasia, and three local banks Halyk Bank, Altyn Bank and Eurasian Bank, are participating in the project. Several more crypto-exchanges and Kazakh banks are planning to join, including crypto exchange giant - Binance. Recently, Binance finally obtained its license from the AIFC for conducting crypto exchange business.
Before this pilot project, the AIFC accepted the use of cryptocurrency. However, Kazakhstan’s jurisdiction made it difficult for them to open bank accounts on the territory of Kazakhstan, and crypto companies did not have access to local fiat infrastructures. Now, this opportunity has officially appeared. Exchanges have already begun registering clients on their platforms for operations with digital assets.
Thus, if you are an investor willing to open a crypto exchange in Kazakhstan, here are some tips from Sanzhar Amangeldy, one of 86 fully registered legal advisors at the AIFC.
There are 16 legal structures available; crypto companies may choose one of 10 types of legal structure. First, let us review the three examples of registering a Private Company.
Before this pilot project, the AIFC accepted the use of cryptocurrency. However, Kazakhstan’s jurisdiction made it difficult for them to open bank accounts on the territory of Kazakhstan, and crypto companies did not have access to local fiat infrastructures. Now, this opportunity has officially appeared. Exchanges have already begun registering clients on their platforms for operations with digital assets.
Thus, if you are an investor willing to open a crypto exchange in Kazakhstan, here are some tips from Sanzhar Amangeldy, one of 86 fully registered legal advisors at the AIFC.
There are 16 legal structures available; crypto companies may choose one of 10 types of legal structure. First, let us review the three examples of registering a Private Company.
1
Authorisation / In-Principal Approval
2
Registering a Legal Entity
3
Obtaining a License to Provide Financial Services
STAGE 1
Authorisation / In-Principal Approval
The Astana Financial Services Authority (AFSA) issues three types of licenses: Regulated activities, Market Activities and Ancillary Services. Licenses determine the type and scope of financial services that a firm is allowed to provide. In our case, the crypto mining companies fall under the Market Activities type.
The authorisation process helps the AFSA identify, prevent serious misconduct or harm, and ensure that firms and individuals meet threshold conditions. The requirements for crypto exchanges to obtain a license from AFSA are very strict. Creating an essentially new financial platform requires special attention. And those requirements that companies must comply with are essential. The same applies to the financial guarantees that companies provide to their clients. For example, to work with retail investors, companies must have at least USD 250,000 in their bank account and at least USD 500,000 to work with professional investors.
During this stage, the applicant submits the application forms and supporting documents listed in the Documentation Checklist section of the applications. Then, the AFSA considers the application and provides preliminary comments.
The purpose of this stage is the preliminary approval of the possibility of obtaining a license by the applicant. To save time and recourses for all parties, the AFSA reviews all applicant documentation for compliance with the AIFC requirement before starting the licensing process. If there are any remarks or comments on the applicant's documentation, the AFSA gives time to eliminate the inconsistencies and resubmit the documents.
If the application is successful, the AFSA will notify the applicant of the status of the application and issue a letter of In-Principal Approval.
The authorisation process helps the AFSA identify, prevent serious misconduct or harm, and ensure that firms and individuals meet threshold conditions. The requirements for crypto exchanges to obtain a license from AFSA are very strict. Creating an essentially new financial platform requires special attention. And those requirements that companies must comply with are essential. The same applies to the financial guarantees that companies provide to their clients. For example, to work with retail investors, companies must have at least USD 250,000 in their bank account and at least USD 500,000 to work with professional investors.
During this stage, the applicant submits the application forms and supporting documents listed in the Documentation Checklist section of the applications. Then, the AFSA considers the application and provides preliminary comments.
The purpose of this stage is the preliminary approval of the possibility of obtaining a license by the applicant. To save time and recourses for all parties, the AFSA reviews all applicant documentation for compliance with the AIFC requirement before starting the licensing process. If there are any remarks or comments on the applicant's documentation, the AFSA gives time to eliminate the inconsistencies and resubmit the documents.
If the application is successful, the AFSA will notify the applicant of the status of the application and issue a letter of In-Principal Approval.
STAGE 2
Company Registration
To apply for registration of a crypto mining company with the legal structure of a Private Company, the applicant must provide the following information:
- Application for legal name reservation - must be accompanied by the prescribed fee set out in the AIFC Legal Acts from time to time.
- Articles of Association - one of the constitutional documents of a company, which sets out the company's basic management, administrative structure and corporate governance.
- Partnership Agreement – a written agreement that records the matters agreed between the partners in relation to the internal workings of the partnership.
- Registered office address - physical location to address all communications and notices. The registered address must be located in the AIFC territory in Nur-Sultan city.
- Authorised signatory - a person authorised to act on behalf of the legal entity in matters related to its operation. This authority may be granted by issuing a resolution or a power of attorney, a copy of which must be submitted to the Registrar of Companies along with the application to register a legal entity.
- Directors - the first directors of a Company must be elected by the Incorporators. A Private Company must have at least one director.
- Chief Executive Officer - natural person and has an Individual Identification Number, appointed by the Shareholders or Directors. The Chief Executive Officer shall have the broadest powers to act in all circumstances in the name of the Company.
- Company Secretary - an officer appointed by the directors of a Company as responsible for ensuring that the Company’s corporate administration obligations under the AIFC Legal Acts are complied with.
- Beneficial Owner - body corporate - shareholder/partner are required to provide details of its beneficial owner who holds more than 25% of shares /ownership.
- Resolution - the registration application must be accompanied by a copy of the resolution signed by each of the shareholders/partners of the proposed legal entity.
- Anti‐Money Laundering - complete the questionnaires concerning the Anti‐Money Laundering section.
STAGE 3
License
Issuance of a license is the final stage for establishing a crypto company in the AIFC. Before applying for a license, the company must pay a fee of - USD 5,000 - USD 125,000. After reviewing all comments, making the appropriate changes and receiving the Certificate of Registration and In-Principal Approval, the applicant submits the whole set of documents. On this basis, the final decision on issuing a license is made. After obtaining a license, the applicant has the right to carry out his activity.
In addition, the government introduced novelties for crypto miners to support crypto exchange development. The Kazakh Parliament approved the draft law "On Digital Assets in the Republic of Kazakhstan" in the first reading. The purpose of the law is to create a legislative framework for the production and circulation of secured and unsecured digital assets.
This law stipulates that electricity consumption in Kazakhstan will be strictly regulated. Also, the law provides incentives for FDI to construct power stations, including renewable energy sources.The law will regulate the production and circulation of digital assets in the Kazakhstan market. Miners will be full-fledged participants in the economy of Kazakhstan and generate taxable income benefiting the state.
In this digital market, a miner will be obliged to support crypto exchanges and exchange up to 75% of mined cryptocurrency on domestic crypto exchanges starting from 2024.However, the process is still unclear, will this apply to all mined cryptocurrency or just part of mined cryptocurrency which miners will be willing to exchange for fiat.
Another significant amendment is the taxation of miners. In terms of taxation, in addition to existing value-added taxes on the import of equipment and fees for digital mining per kilowatt, it is planned to levy corporate income tax on miners’ remuneration, tax on mining pool income, and fees on operations on crypto exchanges to the republican budget.
Thus, Kazakhstan is one step closer to being a crypto hub for the whole world. We genuinely consider that developing regulations in Kazakhstan will help crypto to advance in the financial world.
In addition, the government introduced novelties for crypto miners to support crypto exchange development. The Kazakh Parliament approved the draft law "On Digital Assets in the Republic of Kazakhstan" in the first reading. The purpose of the law is to create a legislative framework for the production and circulation of secured and unsecured digital assets.
This law stipulates that electricity consumption in Kazakhstan will be strictly regulated. Also, the law provides incentives for FDI to construct power stations, including renewable energy sources.The law will regulate the production and circulation of digital assets in the Kazakhstan market. Miners will be full-fledged participants in the economy of Kazakhstan and generate taxable income benefiting the state.
In this digital market, a miner will be obliged to support crypto exchanges and exchange up to 75% of mined cryptocurrency on domestic crypto exchanges starting from 2024.However, the process is still unclear, will this apply to all mined cryptocurrency or just part of mined cryptocurrency which miners will be willing to exchange for fiat.
Another significant amendment is the taxation of miners. In terms of taxation, in addition to existing value-added taxes on the import of equipment and fees for digital mining per kilowatt, it is planned to levy corporate income tax on miners’ remuneration, tax on mining pool income, and fees on operations on crypto exchanges to the republican budget.
Thus, Kazakhstan is one step closer to being a crypto hub for the whole world. We genuinely consider that developing regulations in Kazakhstan will help crypto to advance in the financial world.
Author
+7 727 344 92 92
HQ: Nurly Tau, Block 1B, office 204, 19 Al-Farabi avenue, Almaty, Kazakhstan
HQ: Nurly Tau, Block 1B, office 204, 19 Al-Farabi avenue, Almaty, Kazakhstan
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