Fintech Sector in Kazakhstan Raises Alarms Over Proposed Gambling Regulation

Fintech companies in Kazakhstan are expressing strong concerns regarding a proposed law aimed at regulating betting transactions within the country.

According to a joint press release from industry firms, the legislation, currently in its final reading, seeks to establish a monopoly entity known as the Unified Accounting System (UAS). This system would centralize market participants, handle payments, maintain a single electronic wallet, and manage client settlements. A major contention among critics is the UAS's potential to levy commissions of up to 1.5% on all market transactions, in a sector where regulated transactions exceed KZT 1.2 trillion ($2.6 billion) annually.

Irina Davidenko, spokesperson for Kazakhstan’s payments industry, voiced concerns, stating: “The proposed legislation would be a step backwards for Kazakhstan, harming competition in the country’s vital payments sector and signaling to the outside world that necessary business reform is being driven by shadowy interests, rather than what’s right for industries and consumers.”

The legislation, purportedly aimed at addressing problem gambling as a public health measure, resembles a previous initiative, the Betting Accounting Centre (BAC), which was shelved in 2021 amidst scandal involving bribery allegations against a deputy minister linked to BAC lobbyists.

Critics highlight the lack of transparency surrounding the UAS's structure and ownership as outlined in the legislation. The reintroduction of a UAS model in the legislation’s second reading has raised concerns about its potential impact, particularly since it lacks the comprehensive impact analysis typically required for significant regulatory changes.

Observers argue that the proposed regulation duplicates existing functions already managed by Kazakh state bodies and was introduced without the cooperation of the National Bank of Kazakhstan. The central bank had previously developed its own reform proposal aimed at avoiding the introduction of a monopolistic entity.

Opponents fear the regulation could inflict “significant economic damage.” Representatives from the National Bank of Kazakhstan and the payments industry have expressed alarm, urging reconsideration of the legislation. They advocate sending it back to the lower house of the legislature for a full regulatory impact analysis to ensure it does not adversely affect industries or the economy.

Ilya Efimenko, commercial director of the payment organization PayDala, appealed: “I appeal to the Senators, who need to know the true purpose of why the UAS has made a comeback in the bill. This is a re-emergence of the ‘Betting Accounting Center’ (BAC), a strikingly similar entity that was withdrawn before, and behind which, as the deputy from the Amanat party Elnur Beisenbayev said, are the powerful forces of ‘Old Kazakhstan.’ Before our eyes, a monopolist, a private operator, is being created. The emergence of monopolies such as the UAS threatens the principles of a Fair Kazakhstan. Now everything is being done to break the financial system of Kazakhstan, recognized by experts as one of the best in Central Asia.”

The fintech and payment sectors are urging thorough scrutiny and revision of the proposed legislation to safeguard industry integrity and economic stability in Kazakhstan.

By fLEXI tEAM