A transaction using contactless card technology has been demoed during an event in Kazakhstan marketed as the launch of the world’s newest central bank digital currency (CBDC) – the digital tenge.
The technology platform for the CBDC was ‘put into operation’ during the 15 November conference, the National Payments Corporation of Kazakhstan – a recently created organisation charged with the implementation of digital financial infrastructure and the CBDC itself in the former Soviet nation – announced in a LinkedIn post.
National Payments Corporation of Kazakhstan chairman Binur Zhalenov delivered an update at the 11th ‘Congress of Financiers of Kazakhstan’ on the authorities’ CBDC progress and himself made a ceremonial first purchase, via card and point-of-sale terminal, in digital tenge.
The new digital currency – a sibling for the country’s paper currency, which is 30 years old this year – will be rolled out in stages, with the disbursement of government funds among the planned uses being championed.
Kazakhstan’s progress will carry significance among global government fintech watchers because just a handful of nations – most notably the Bahamas, Jamaica and Nigeria – have to date formally issued a CBDC. But major nations, including China and Russia – which both border Kazakhstan, a country with a population of about 19 million – are both well progressed with the rollout and testing, respectively, of a digital yuan and digital ruble.
Onay’s the way forward
The National Bank of Kazakhstan issued a press release on 15 November describing the technology platform as being ‘launched in pilot mode… in a limited environment and with real users’ .
‘It is planned to complete the full introduction of digital tenge by the end of 2025 by expanding its services, usage scenarios and the environment of platform participants,’ the central bank’s announcement stated.
Two schools in Almaty, the city that hosted the conference, will serve as test-beds for CBDC use, according to an article published on 15 November by the Kazinform News Agency.
The news agency’s article references the use of ‘Onay’ cards, which were introduced in 2015 for people to make transport payments.
‘This year, schoolchildren of two schools in Almaty are to use the digital tenge. That is, the digital tenge platform has been implemented into the Onay card. The card can be used to make payments at canteens with the money going to the school’s [digital] wallet,’ said Ainur Kenzhayeva, a project manager at the National Bank of Kazakhstan Payment and Financial Technologies Development Centre, according to the Kazinform report.
Private-sector partners on board
In a 55-second video posted on LinkedIn by the National Payments Corporation of Kazakhstan to promote the first retail transaction, the logos of payments companies Visa and Mastercard, as well as Eurasian Bank, Halyk Bank, BCC (Bank CenterCredit) and Altyn Bank were visible on the venue’s big screen.
Visa stated in its own announcement (also on 15 November) that the ‘first-ever’ digital tenge transaction took place on a Visa card, adding that digital tenge-linked Visa cards will be available through Halyk Bank, BCC and Altyn Bank (Kazakhstan-headquartered retail banks). ‘The new Digital Tenge linked Visa-card brings interoperability between the new Digital Tenge and Visa payment credentials and can be accepted at any Visa-accepting merchant location,’ Visa stated.
Visa’s announcement went on to state that ‘during the first stage of the Digital Tenge introduction, the CBDC-linked cards will be available for employees of the National Payments Corporation [of Kazakhstan].’
It also added that the Digital Tenge ‘aims to streamline the disbursement of government funds, with a focus on more efficient and speedy distribution of social governmental payouts.’
‘The development of the Digital Tenge is under the direct supervision of the President of Kazakhstan and will become a key element of the country’s payments infrastructure, by expanding access to cashless payments, transparency of government disbursements and creation of opportunities for new, innovative financial products,’ the company added.
FURTHER READING CBDC ‘industrial park’ opens in China to advance digital currency development – a news story (24 October 2023) on a development to encourage the digital yuan (e-CNY) in Shenzhen
‘Unlocking the potential of blockchain’
“The Digital Tenge will serve as a third form of national currency in addition to cash and non-cash transactions,” National Payments Corporation of Kazakhstan’s Zhalenov stated in Visa’s press announcement.
“It unlocks the potential of blockchain technology to create innovative financial services, ensures targeted and efficient government spending, and also builds a ‘bridge’ between traditional finance and the world of digital assets,” he continued, describing the launch event as “the start of the development of the Digital Tenge ecosystem” and adding that “in the near future, Kazakhstanis will be able to use the first products based on it.”
The National Payments Corporation of Kazakhstan has also co-produced a report, ‘Digital payment trends: a look at the future in the world and in Kazakhstan’ alongside Mastercard. Zhalenov is co-author of the 66-page report’s foreword.
On 17 November, Mastercard published a commentary-style announcement stating that the ‘first CBDC card issued by [Kazakhstan-headquartered] Eurasian Bank and powered [by] Mastercard was presented on the 30th anniversary of the Tenge, Kazakhstan’s national currency’.
Mastercard’s announcement added that ‘the Digital Tenge Card instantly converts funds to traditional Tenge currency and is available to make purchases anywhere Mastercard is accepted in Kazakhstan and around the world.’
FURTHER READING Think you know CBDCs? An A(CID) to Z(KP) test – a feature article (26 June 2023) focused on some of the many technology considerations involved with CBDCs (the article is based on the Bank of England’s ‘Digital pound: technology working paper’, which digs deep into areas including smart contracts and programmability)
‘Smart social aid through digital tenge’
‘This project, which began as a bold idea in September 2020, has now materialised into a transformative digital currency,’ wrote Zhalenov in a post on his own LinkedIn page, stating that ‘significant steps [have been taken] towards enabling proactive, transparent and smart social aid through digital tenge’.
Zhalenov’s post pays tribute to the efforts of public servants including Kenzhayeva; Yeldos Kuanyshbekov – who until earlier this year was chief executive of National Bank of Kazakhstan Payment and Financial Technologies Development Centre and is now IT managing director at the Kazakhstan Stock Exchange; and the National Payments Corporation of Kazakhstan’s Dina Balkina; as well as private-sector consultants who have worked on the CBCD’s development.
‘Our journey kicked off in earnest in May 2021, amidst uncertainties and risks, when we published our first paper on the Digital Tenge concept,’ he wrote, explaining that ‘successful proof-of-concept and testing phases’ had followed, with a ‘bold’ decision to commit to launching the digital tenge made in December 2022.
He added that a white paper will be published next month (December) ‘to summarise our journey and outline our future plans’. In a further LinkedIn post he stated that ‘as we continue this journey, our collaboration with key partners in the field of money tokenisation is set to expand further.’
FURTHER READING CBDC-linked prepaid card debuts as Bahamas central bank consults on regulation – a news story (23 February 2021) on a development described as the ‘world’s first’ CBDC-linked prepaid card (created through a partnership between the central bank, Mastercard and local mobile payments firm Island Pay)
Aiming to speed up digitalisation
The National Payments Corporation of Kazakhstan was launched a couple of months ago.
The body is a re-constitution of the Kazakhstan Interbank Settlements Centre. It will supervise areas including digital identification (ID), as well as interbank money clearing and transfers. The implementation of open banking also falls into its remit.
‘The National Payment[s] Corporation will ensure the uninterrupted functioning and development of the national payment system on the principle of equal accessibility for all market participants,’ according to a press release issued by the central bank on 15 September.
The announcement stated that the ‘re-organisation’ would ‘further improve the efficiency, security and reliability of the country’s payment infrastructure, as well as accelerate the pace of introduction of innovative products and digitalisation of the financial sector.’
The National Bank of Kazakhstan is one of three central banks that has been involved in ‘beta-testing’ an ‘interlinking’ solution for connecting CBDCs developed by SWIFT (the Society for Worldwide Interbank Financial Telecommunication).
The central bank has recently had change of leadership, with former economy minister Timur Suleimenov appointed as its new governor in September. He succeeded Galymzhan Pirmatov.
Global Government Fintech’s Digital Currencies topic section