Fintech
New Kazakh law puts independent fintech operators at risk
There is currently a mad rush by Kazakhstani lawmakers to pass a new bill that would see tighter control over the betting industry by a shady third-party regulator.
This new legislation, brought forward under the banner of a “public health law”, plans to introduce numerous measures. However, the most interesting and concerning part of this new law is the third-party “Unified Accounting System” (the “regulator”). This entity would regulate Kazakhstan’s nascent fintech industry and be granted decisive and overwhelming control of the market and payment systems. It could also determine which companies can participate in the market.
In previous versions, the law was rejected as politicians accepted bribes to introduce this regulator. By reintroducing it now, at the last minute, the government hopes that no one will notice the threat it poses to Kazakhstan’s young fintech industry.
The Kazakh government is reintroducing a law, currently on second reading in Parliament, which will introduce a regulator with broad powers over this sector. This is not a new move by the Kazakh government. The government’s first attempt to pass the regulator occurred in January 2020. At the time the regulator was called the “Betting Account Centre” (BAC). Exirius LLP, an opaque Kazakh private company, and PayBox, a Kazakh payment processing company, won an earlier tender to establish and manage all functions of the BAC.
The proposed introduction was put on hold in 2021 when Kazakhstan’s then deputy culture minister, Saken Musaybekov, was fired for accepting bribes from pro-BAC lobbyists. After holding a press conference in 2019 against the introduction of the BAC, the government arrested the owners of the independent betting company Olimp as members of “organised crime syndicates” and the case is still ongoing.
In 2022, two Kazakhstani deputy prime ministers, Serik Zhumangarin and Erulan Zhamaubaev, ordered the Ministry of Culture and Sports to exclude references to the BAC from future draft laws. Unfortunately this directive was never implemented.
Kazakhstani lawmakers recently approved the Comprehensive Plan to Combat Illegal Gambling and Gambling Addiction through a second reading in quick succession. The new legislation, which has been discussed for months, reintroduced the regulator at the last moment and passed two parliamentary readings in two days.
Under the proposals, the company given regulatory powers will have monopolistic control over the market. The regulator, a third party to be introduced, will be able to determine who can participate in the market, cut off all transactions and exclude other fintech operators from participating.
If passed into law, Kazakhstan’s thriving fintech community will be excluded from a key part of the gambling legislation, and independent bookmakers risk being priced out of the market. The market sees this as the beginning of state takeover of the sector.
Now it will be up to the Senate and the President, ultimately, to decide whether this regulator, once destined to be permanently eliminated, will be enacted into law. Their decision will determine the future of Kazakhstan’s independent fintech and betting sector.
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