Central bank digital currencies (CBDCs) exist primarily in the virtual realm, with transactions primarily initiated through web and mobile interfaces.
But a big change is in store as Eurasia’s first CBDC card is launched in Kazakhstan, giving 20 million consumers a new, tangible way to manage their CBDC funds.
of Eurasia’s first CBDC card transaction Successfully created on November 15, 2023.
It was a contactless payment at the POS using a card issued by Eurasia Bank JSC on the Way4 digital payment software system, a milestone in the region’s digital currency journey.
Today, just six months later, Digital Tenge Currency It is used for both in-store purchases and e-commerce transactions and is accepted worldwide through the Mastercard and Visa networks.
The rapid adoption of these cards highlights the project’s success and potential for growth.
CBDC for Cross-Border Payments, Programmable Money, and DeFi
Kazakhstan’s Digital Tenge Project pursues several ambitious goals, including enhancing cross-border trade, implementing innovative social and anti-corruption initiatives, and integrating digital assets issued by decentralized finance (DeFi) participants with those issued by the government.
Some of the digital tenge use cases being piloted include cross-border CBDC wholesale transactions with the Hong Kong Monetary Authority, CBDC vouchers for school lunches, smart contracts designed to protect public funds allocated for road construction, and a digital tenge stablecoin on the Binance cryptocurrency exchange.
These diverse use cases demonstrate the versatility and potential impact of digital tenge.
MVP in Production: CBDC, Bank and Card Network Interoperability
Astana, the capital of Kazakhstan. Image by bahonya from Pixabay
Prior to launching the digital tenge, Kazakhstan’s National Payments Corporation had been studying various CBDC architecture models advocated by the IMF, BIS, ECB, Monetary Authority of Singapore and other organizations.
The regulator decided to centralize the issuance and redemption of digital tenge and allow trusted market participants to facilitate CBDC workflows related to accounts, cards and payments.
Corda, a blockchain and tokenization platform developed by R3, a provider of digital currency, digital asset, integration and interoperability solutions, is the foundation of the Digital Tenge infrastructure.
Kazakhstan’s National Payments Corporation has adopted the platform and is creating APIs for other participants.
Kazakhstan stands out in this respect, thanks to its modern, flexible and fast-integrating infrastructure that has enabled commercial banks to quickly and smoothly onboard the CBDC initiative.
Over the years, many banks here have Open Way‘s Way4 software system, it aims to pioneer payment innovations such as the first UnionPay card issued outside China and the world’s first mobile Visa P2P remittance.
today, Way 4 It is driving card issuance and acquiring innovation for many members of the digital tenge ecosystem, including the Kazakhstan National Payments Corporation, Eurasia Bank, Altyn Bank, Halyk Bank and the state-run postal service, KazPost.
Three of these commercial banks, with the support of integration partner OW Kazakhstan, integrated their card processing systems onto the Digital Tenge platform in just six weeks.
By the end of 2023, the three banks had successfully onboarded 72 percent of all CBDC cardholders in the country and processed 75 percent of all card transactions with digital tenge.
Three Kazakhstan banks launch CBDC services
The CBDC services launched by Eurasia Bank, Altyn Bank and Khalik Bank include opening digital tenge accounts for individuals or legal entities on the government’s digital tenge platform.
They will also issue you a Mastercard or Visa plastic card linked to your Digital Tenge account.
Banks process card payments with digital tenge (both closed-loop and open-loop transactions) at their POS terminals and convert the digital tenge into regular non-cash tenge in real time.
Cash withdrawals in digital tenge can also be facilitated through the bank’s ATM network. This accessibility allows users to easily convert their digital funds into physical currency when needed.
How banks can differentiate their CBDC services
The flexibility of the Way4 system allows banks to build their own CBDC services, and this customization capability is key to meeting diverse customer needs.
Eurasia Bank has enabled additional types of retail transactions with digital tenge cards, which do not require conversion of digital tenge to regular non-cash tenge. The bank also processes P2P transfers in digital tenge between its customers.
Altyn Bank is currently the only bank that supports withdrawing cash from Digital Tenge accounts using ATMs of other banks.
Eurasia Bank and Khalik Bank are issuing plastic cards linked to digital tenge accounts.
Both Altyn Bank and Halyk Bank support Digital Tenge payments from legal entities to a list of individuals.
Meanwhile, Altyn Bank and Eurasian Bank will process e-commerce transactions on Digital Tenge.
Expanding digital tenge footprint in 2024
Given the achievements of these early participants, more banks participating in the Way4 system may decide to introduce CBDC cards in 2024.
Increasing the number of participating banks is the first challenge in the National Bank of Kazakhstan’s digital tenge project.
Other plans include exploring new scenarios for a wholesale CBDC, implementing smart contracts to ensure the level of the digital tenge is aligned with stablecoin reserves, introducing digital tenge vouchers for education services, piloting offline payments and transfers in digital tenge for users without internet access, and pursuing other CBDC innovations.
The digital tenge account also complies with open API standards, ensuring integration within the broader financial ecosystem.
Binur Zarenov
“We can shape the global discussion on digital currency, and by the time it’s everywhere, it will be working well for us here.”
Binur Zarenov, CEO and Director of Kazakhstan’s National Payments Corporation, predicted:
This project strengthens Kazakhstan’s position on the international economic stage.
To read the full OpenWay case study, here.
