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In an obvious U-turn of policy, Kazakh Central Bank now recognizes the benefits of the Blockchain.
Blockchain has great advantages for storing digital assets – quick transfer of title, robustness, counterfeit-proof and low transaction costs. The latest to recognize these advantages is the central bank of Kazakhstan.
Kazakhstan’s central bank has announced plans to launch a Blockchain-based system in the second half of 2017, through which it will sell short-term bonds to retail investors. Investors will be able to access the system using a mobile application and will be able to buy bonds directly, with no commission. The quick settlement, low transaction costs and ease of buying are expected to make these bonds attractive for retail customers.
Storing digital assets on the Blockchain is not a new idea. Digital Asset Holdings, led by ex-J.P. Morgan banker Blythe Masters, is one of the well-known companies in this field. As early as 2015, issuers were able to use the Nasdaq Linq Blockchain technology to record private securities transactions. Banks across the world are engaged in pilot studies to see how their existing legacy databases, especially in the securities segment, can be replaced by Blockchain technology.
The primary reason why government authorities refuse to outrightly back Bitcoin or other cryptocurrencies is the pseudonymity and other privacy features associated with them.
They also fear the loss of control over the monetary system. In 2013, the Kazakhstan vice minister of finance stated that his country’s position in the global financial system could be undermined by Bitcoin.
Governments are more supportive of Blockchain technology, given its potential to reduce costs. By storing the bonds on a Blockchain, the central bank aims to capitalize on the advantages of the Blockchain, without diluting the strict identification norms required for users.
This system could be used to market other securities as well, including stocks targeted for sale to retail investors during IPOs.
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