Kazakhstan has launched a new pilot project with its central bank digital currency (CBDC) to showcase its programmability.

Working with the Ministry of Finance, the National Bank of Kazakhstan (NBK) demonstrated a significant improvement in value-added tax (VAT) reimbursement processing.

CBDC to get VAT back faster

According to NBK chief digital officer Binur Zhalenov posting on LinkedIn, VAT was automatically marked in business-to-business transactions using the digital tenge CBDC, resulting in a reduction in the waiting time for exporters’ refunds from 70-75 days to 10-15 days, “with the goal of achieving instant reimbursement in the near future.”

The greater efficiency is due to the elimination of manual checks by the State Revenue Committee tax authority. Zhalenov added that pilot projects were in the works to feature the digital tenge in public procurement, targeted financing from the country’s sovereign wealth fund and investment subsidies. He wrote:

“These initiatives demonstrate the versatile applications of programmable money in enhancing government processes and financial operations.”

There are already 40 billion tenge ($81,800,000) circulating in digital form, according to Zhalenov.

Kazakhstan CBDC pilot drastically reduces VAT refund wait image 0

Source: Digital Pound Foundation

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Programmability at the heart of the digital tenge

Kazakhstan has been working on a CBDC since February 2023, when it launched its first pilot . Programmability was a central feature of the CBDC from the beginning, as it was seen as a means of fighting corruption.

Later in 2023, the Center for Interbank Settlements was reorganized into the National Payment Corporation and charged with developing a CBDC infrastructure. A digital tenge pilot was launched in November 2023 that demonstrated both retail and wholesale uses.

Local banks issued Visa and Mastercard debit cards linked to CBDC accounts and an array of wholesale uses included issuing a digital tenge-backed stablecoin, tokenizing gold and making cross-border transactions via SWIFT.

In a project to highlight the digital tenge’s programmability, the CBDC was used to pay for the construction of a rail line from central Kazakhstan to the Chinese border. The digital tenge were “marked” for payment “only to organisations that have fully fulfilled the required obligations.”

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