New Kazakh Law Puts Independent Fintech Operators at Risk

There is currently a mad dash by Kazakh lawmakers to pass a new bill that would see tighter control over the betting industry by a shady third-party regulator.

This new legislation, which is being carried under the banner of a ‘public health bill,’ plans to introduce many measures. However, the most interesting and worrying part of this new law is the third-party ‘Unified Accounting System’ (the ‘regulator’). This entity would regulate Kazakhstan’s nascent fintech industry and will 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 iterations, the law has been thrown out as politicians accepted bribes to bring in this regulator. By reintroducing it now at the last minute, the government is hoping no one will notice the threat it poses to Kazakhstan’s young fintech industry.

The Kazakh government is reintroducing a law, which has currently passed its second reading in Parliament, that will bring in a regulator with sweeping powers over this industry. This is not a new move by the Kazakh government. The government’s first attempt to get the regulator through was back in January 2020. The regulator was referred to back then as the ‘Betting Account Centre’ (BAC). Exirius LLP, an opaque private Kazakh company, and PayBox, a Kazakh payment processing company, won a previous tender to establish and manage all the functions of the BAC.

The proposed introduction was paused in 2021 when the Kazakh vice minister of culture at the time, 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 bookmaking company Olimp as members of ‘organized crime syndicates,’ and the case is still ongoing.

In 2022, two Kazakh deputy prime ministers, Serik Zhumangarin and Erulan Zhamaubaev, directed the Ministry of Culture and Sport to exclude references to the BAC from future draft legislation. Sadly, this directive was never implemented.

Kazakh lawmakers recently passed the Comprehensive Plan to Combat Illegal Gambling Business 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 has passed two parliamentary readings in two days.

Under the proposals, the company awarded the regulator’s 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, take a cut of all transactions, and exclude other fintech operators from participation.

If passed into law, Kazakhstan’s thriving fintech community will be excluded from a key part of gambling legislation, and independent bookmakers are at risk of being excluded from the market. The market sees this as the beginning of state capture over the sector.

Now it will be up to the Senate and the President, as a last resort, to decide whether this regulator, once meant to be thrown out for good, will be introduced into law. Their decision will determine the future of Kazakhstan’s independent fintech and betting industry.