In 2021 the National Bank of Kazakhstan (NBK) began trials for a Digital Tenge (DT). After two years of central bank digital currency (CBDC) research and consultations with stakeholders, the project will progress to the next phase, with widespread implementation expected by 2025.
The CBDC began as a central bank project, but on Friday the NBK announced it established the National Payment Corporation that will include the Kazakhstan Center for Interbank Settlements (KISC). The organization will be responsible for the development of the CBDC as well as other payment systems. One of the goals is to accelerate innovation and digitalization.
Additionally, the central bank also published a paper on its progress in developing a CBDC.
Initially the digital Tenge work focused on consumer transactions and a retail CBDC. However, over time the central bank started exploring the potential for interbank settlements and cross border payments. While the retail CBDC has a clear path to production, the wholesale and tokenization work is considered research.
Progress of the retail CBDC
In October 2022, the central bank completed its first live tests, including 200 customers, four merchants and advanced functionality. The trial was deemed a success and included experiments for offline transactions (using QR codes and mobile NFC payments) and options for limited programmability.
The next phase of the project will integrate the CBDC with existing payment systems and several private banks. The NPC will begin testing cross-border transactions with Swift.
During this phase, government agencies will pay one another for services via the CBDC platform within a simulated environment. The NPC will also experiment with the CBDC for public procurement. This phase will provide a foundation for both further trial projects and the eventual widespread adoption of the digital Tenge.
Research into tokenization and wholesale CBDC
At the same time as moving the retail CBDC forward, the NPC will explore other more experimental use cases. One avenue is how the digital Tenge could be used for asset tokenization with fintechs. Additionally, there’s an interest in participating in DeFi, so the NPC will explore stablecoins backed by a CBDC.
Separately, there will also be a wholesale CBDC trial involving the stock exchange using smart contracts for conditional payments and delivery versus payment (DvP).