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Kazakhstan’s National Bank (NBK) is showcasing the transformative potential of its central bank digital currency (CBDC), the digital tenge, with a pilot program that drastically shortens value-added tax (VAT) reimbursement times. Launched in collaboration with the Ministry of Finance, this project highlights the efficiency and control benefits offered by programmable money.
Accelerating VAT Refunds with CBDC
In the new system, VAT is automatically marked in business-to-business transactions using the digital tenge, significantly reducing the typical VAT refund period for exporters from 70-75 days to just 10-15 days, with ambitions to achieve instant refunds soon. This improvement, shared by NBK’s Chief Digital Officer Binur Zhalenov on LinkedIn, eliminates manual tax authority checks by the State Revenue Committee, streamlining the process for businesses.
Zhalenov also noted that additional CBDC pilots are being developed to enhance processes in public procurement, sovereign wealth fund allocations, and investment subsidies. “These initiatives demonstrate the versatile applications of programmable money in enhancing government processes and financial operations,” he stated. Currently, around 40 billion tenge (roughly $81.8 million) is in circulation digitally.
Expanding Programmability Across Sectors
Kazakhstan has prioritized programmability in its CBDC development since launching its initial pilot in early 2023, viewing it as a tool to combat corruption and ensure accountability. A later pilot in November 2023 broadened the digital tenge’s applications for both retail and wholesale uses. This included linking CBDC accounts to Visa and Mastercard debit cards and issuing a stablecoin backed by the digital tenge for tokenized assets like gold and cross-border payments via SWIFT.
One of the project’s significant accomplishments involved using the CBDC to fund construction on a key rail line linking Kazakhstan to China. In this case, digital tenge were programmed to release funds only to organizations meeting their contractual obligations, demonstrating the technology’s potential in public project funding.
This latest success with VAT refunds underscores Kazakhstan’s commitment to leveraging CBDC for more efficient and transparent financial transactions, with broader national and cross-border applications anticipated as the digital tenge infrastructure evolves.
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