Forex regulation to make its way to Kazakhstan

Former Soviet Union member state Kazakhstan nestles in the eastern region of the Caucasus, and until now has not been synonymous with the FX industry whatsoever. Indeed, quite the contrary.

Whilst the Russian Federation has played host to a rapidly developing financial markets economy with prominent trading venues such as Moscow Exchange embarking on infrastructure development and connectivity which places it on the world stage as ruble liquidity becomes in greater demand, many of the former Soviet bloc continues to eschew participation. A change may be in sight, however, as the onset of discussion within Russia’s state Duma has centered on establishing a regulatory framework for its ever advancing electronic trading sector, and many Russian firms step up to attract clients from the former Soviet Union regions, now known as the Commonwealth of Independent States.

So far, a regulatory structure has been as equally absent as industry participation from the eastern extremities of the CIS region, however Russia’s self-regulatory authority CRFIN has today announced that an assembly of officials is now forming in order to focus on regulation for FX firms in Kazakhstan, and firms wishing to solicit for business in Kazakhstan.

According to investment analyst Erlan Abdikarimova of Freedom Finance, the fact that the local market is unregulated serves to undermine the credibility Kazakhstan within the financial industry as a whole. “If activities related to finance are not regulated by law, this can lead to various abuses and unfair practices in all sectors of the financial market.”

“Having a business model in which companies with insufficient funds are able to bring clients’ assets into the interbank market, or trying to carry out “internal clearing” (internalizing all trades and not transferring them to the real market) generates a conflict of interests where the profit forex broker is the loss of the client. This business model can only work in the unregulated market. Such practices can lead to the undermining of confidence in the financial industry as a whole” stated E.Abdikarimov.

Despite the unfortunate portrayal of Kazakhstan as a very undeveloped nation some years ago by British comedian Sacha Baron-Cohen via his alter-ego Borat, the nation has benefited from a substantial rise in public awareness to its presence within the CIS region. Quite contrary to causing detriment, the fictitious character brought fame and intrigue to Kazakhstan, leading to an increase in foreign investment and tourism, and subsequently had a positive effect on the local economy.

Although a very unorthodox means of drawing attention to the country provided remarkable publicity, perhaps one of the main advantages is its geographical location. Russian business is becoming increasingly aligned with that of neighboring China, bolstered by agreements between the Peoples Bank of China and the Russian state government on collaboration with regard to yuan and ruble liquidity, as well as a great many Chinese traders having been provided with FX services by Russian companies such as EXNESS and Alpari RU, both of whom have made highly successful inroads into the Chinese and South Asian markets.

Should a credible regulatory framework be implemented, Kazakhstan’s proximity to China, as well as the national usage of the Russian language and understanding of Russian and Chinese business methodologies can only serve this ever strengthening geopolitical bond greatly in future.

To read the full announcement from CRFIN, click here.

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