The National Bank of Kazakhstan (NBK) has once again illustrated the transformative potential of programmable central bank digital currency (CBDC) with its latest pilot, which promises to streamline and accelerate government processes significantly. The initiative, conducted in collaboration with the Ministry of Finance, aims to demonstrate how Kazakhstan’s digital tenge CBDC can simplify tax administration and improve efficiency across various sectors.
VAT Refunds in Record Time
In this recent pilot, the NBK focused on optimising VAT reimbursements for exporters, traditionally a slow and manual process. Thanks to the CBDC’s programmability, VAT was automatically identified and recorded in business-to-business transactions, reducing the typical waiting period for VAT refunds from 70-75 days to a mere 10-15 days. NBK Chief Digital Officer Binur Zhalenov has expressed optimism about future advancements, aiming for “instant reimbursement in the near future.”
This streamlined approach is due to the digital tenge’s ability to eliminate manual checks by the State Revenue Committee, making tax processing faster and more reliable. Zhalenov further announced ongoing pilots exploring the use of digital tenge in public procurement, targeted financing from Kazakhstan’s sovereign wealth fund, and investment subsidies, underscoring the CBDC’s flexibility in enhancing public financial operations.
Digital Tenge Marks New Era of Programmability
Kazakhstan’s digital tenge initiative began in February 2023 with programmability at its core, as a tool to combat corruption and ensure funds are used as intended. Later that year, the nation reorganised its Center for Interbank Settlements into the National Payment Corporation, charging it with CBDC infrastructure development. This shift led to the November 2023 pilot, which demonstrated diverse uses of the digital tenge, including issuance of a stablecoin backed by the CBDC, gold tokenisation, and cross-border transactions via SWIFT.
One notable demonstration of programmability was in a project involving payments for a rail line from central Kazakhstan to the Chinese border. Here, the digital tenge was “marked” for use only by contractors meeting specific contractual obligations, ensuring funds were directed towards compliant organisations.
With approximately 40 billion tenge ($81.8 million) now in digital circulation, the digital tenge not only aims to bolster Kazakhstan’s financial efficiency but also demonstrates the far-reaching potential of CBDCs in modernising government and commercial processes. As Kazakhstan continues to explore the programmability of its CBDC, it sets a precedent for other nations considering digital currencies as tools for transparency, efficiency, and economic innovation.
