Kazakhstan and Kyrgyzstan are pursuing plans that could make them significant players in the crypto arena. However, their activities are linked by some observers to attempts by Russian entities' to circumvent Western sanctions.

Kazakh central bank invests $700mn in crypto

In early March, Kazakhstan’s central bank announced that it would allocate $700mn from its reserves for cryptocurrency investments. The allocation will include $350mn from the gold and FX reserves (GFXR) and the same amount from the National Fund, according to Timur Suleimenov, head of the regulator.

“We see that crypto assets are already moving from the margin sector and high-risk category into the category of standard instruments. Therefore, we must not remain on the sidelines. These three sources will be used for this purpose,” Suleimenov said in a statement.

The allocation does not involve direct investments in Bitcoin or other crypto currencies. It will instead focus on shares of high-tech companies in the fields of cryptocurrencies and digital financial assets, index funds and other instruments with similar dynamics, Suleimanov added.

Aliya Moldabekova, deputy chair of the National Bank of Kazakhstan, was quoted by Russian business daily RBC as saying that investments from the FX reserves are to kick off in April or May.

Alex Crypto, backed by Binance

In late September, the Alem Crypto Fund, established by Kazakhstan's new ministry of artificial intelligence and digital development, with the support of major global crypto exchange Binance, began operations in Kazakhstan.

At the same time, the fund reported its first investment in crypto. It is in BNB, the native token of Binance. The amount of the investment was not disclosed.

“Our goal is to make Alem Crypto Fund a reliable instrument for major investors and a foundation for digital state reserves,” Zhaslan Madiyev, Kazakhstan's deputy prime minister, said in a statement published on Binance's website.

"For Binance, this collaboration is part of a global mission to support institutional adoption, build secure and transparent markets and reinforce trust in digital assets," Binance said in its statement. "Together with forward-looking governments and partners, Binance is helping shape the infrastructure of tomorrow’s financial system – one that combines innovation, security, and inclusivity.

Kazakhstan’s CryptoCity

Earlier in 2025, Kazakhstan revealed plans to launch “CryptoCity,” a pilot zone where cryptocurrencies can be used to pay for goods and services.

Speaking at the Astana International Forum, the country’s president, Kassym-Jomart Tokayev said that the pilot zone will be used to explore cryptocurrency adoption within a regulated sandbox environment.

“We are planning to create a pioneering pilot zone called CryptoCity where cryptocurrencies might be used for purchasing goods, services, and even beyond,” he said on his official website.

The move follows previous efforts made by Kazakhstan, Central Asia’s largest economy, in digital currencies. The country also launched a pilot project for a central bank digital currency, which reportedly reduced value-added tax refund wait times.

Kyrgyzstan intensifies crypto push

Kazakhstan’s small neighbour Kyrgyzstan has also moved forward with cryptocurrency projects. Its government has taken an active interest in crypto-related projects.

Last December, a stablecoin pegged to Kyrgyzstan's national currency, the som, was listed on Binance. Stablecoins are cryptocurrencies whose value is linked to that of real-world assets, mostly major currencies, although stablecoins pegged to less prominent currencies have also been issued.

The listing followed Kyrgyzstan’s other attempts to facilitate the development of the crypto industry in the country.

In an X post published at the time, Kyrgyzstan's president Sadyr Japarov said that Kyrgyzstan's stablecoin KGST would contribute to the development of cross-border payments and deepen the country’s ties to the crypto ecosystem. 

Binance CEO Changpeng Zhao, known in the crypto world as CZ, welcomed the move in an X post, adding that “many more” nation-backed stablecoins would be coming to the exchange.

However, CZ's involvement with Kyrgyzstan is apparently deeper. In April 2025, he began advising Kyrgyzstan as part of an agreement to provide technical expertise and consulting services. In September 2025, Kyrgyzstan advanced legislation aimed at creating a state crypto reserve and expanding the country’s digital asset industry.

The country also recently launched USDKG, a US dollar-pegged stablecoin backed by physical gold. The token was issued on the Tron network with an initial supply of 50mn units and there are plans to expand to the more popular Ethereum blockchain.

Tool for circumventing sanctions?

The burgeoning crypto infrastructures of Kazakhstan and Kyrgyzstan can be linked to Russian companies' attempts to dodge Western sanctions, some observers and regulators say.

In the summer of 2025, the UK sanctioned several Kyrgyz entities, accusing them of helping Russia circumvent Western sanctions, slapped on Moscow in the wake of the full-scale invasion of Ukraine in February 2022, through financial and cryptocurrency networks. 

In an announcement published by the UK Foreign, Commonwealth & Development Office on August 20, the British government said Russia had increasingly turned to Kyrgyzstan’s financial sector to move money through opaque channels since Western restrictions cut Russian companies off from parts of the global financial system. Sanctions targeted Capital Bank in Kyrgyzstan and its director Kantemir Chalbayev, which the UK said had been used to facilitate payments for military goods.

The measures also hit cryptocurrency platforms Grinex and Meer, which were described as part of the infrastructure behind cryptocurrencies issued by Russia and allegedly involved in illegal deals. According to the UK government, the A7A5 token moved $9.3bn in just four months and was specifically designed to help bypass Western sanctions. 

The action came alongside similar US measures and formed part of broader Western efforts to disrupt financial networks supporting Russia’s war effort. Separate reports have also suggested that some Kazakh banks and crypto companies may have been involved in helping Russian firms circumvent sanctions.

Stablecoin facilitates Russian payments

The stablecoin A7A5 has recently played a major role in helping Russia to circumvent sanctions. According to reporting by Cointelegraph, the ruble-pegged crypto A7A5 has expanded into a fast-growing crypto payment ecosystem with strong links to Kyrgyzstan-based trading platforms, raising concerns among analysts that it could support sanctioned Russian companies operating outside the traditional financial system.

After the Moscow-based crypto exchange Garantex was sanctioned and shut down, trading in A7A5 continued on Grinex, an exchange based in Kyrgyzstan that blockchain analytics firm Chainalysis describes as the successor to Garantex. The token has also traded on Kyrgyzstan-based platform Meer, as well as peer-to-peer marketplace Bitpapa. 

Despite US and UK sanctions specifically targeting these services, which were introduced in summer 2025, A7A5 trading volumes and the token’s circulating assets surged last year.

A7A5 was launched in February 2025 by the A7 financial platform as a stablecoin pegged to the Russian ruble and designed to facilitate cross-border payments. 

Analysts say its rise reflects Russia’s search for alternatives after Western sanctions cut the country off from major global payment networks. Visa and Mastercard suspended operations in Russia in 2022, and many Russian banks were removed from the SWIFT messaging system, making international settlements far more difficult.

Some observers argue the ecosystem, which has denied any wrongdoing, represents a deliberate attempt by Russia-aligned actors to build a sanctions-resistant financial infrastructure using stablecoins and crypto exchanges.