Kazakhstan's $350M Crypto Plan and the Nature of Crypto

Yesterday, two senior executives of the National Bank of Kazakhstan said the central bank had created a $350 million reserve to invest in crypto. Their quotations are published by Reuters.

I admire the way Kazakh officials phrase things when they talk about cryptocurrencies.

Just a couple of months ago, Kazakhstan adopted a new banking law that, in my opinion, contains one of the clearest definitions of cryptocurrency found in any legislation worldwide. It boils down to just three words: unbacked digital assets. Of course, the definition does not capture every nuance, but it immediately raises an important question: what fundamentally distinguishes Bitcoin and similar cryptocurrencies from stablecoins or other tokenized real-world assets.

Now representatives of the Kazakh central bank have explained the idea of "investing in crypto" with the same level of simplicity. As one of them put it: "It is not that we took $350 million and bought Bitcoin. No. These are shares of high-tech companies connected to the crypto industry..."

An investment means giving capital to a business so it can grow, with the expectation that this growth will benefit you as well. When you buy cryptocurrency, that is not really an investment - it is simply a purchase (or an exchange, if you come to rabbit.io, send us stablecoins, and receive Bitcoin, Monero, or another similar asset in return). An investment, in the classical sense, is when you identify a promising business, provide funding, and receive a stake in that business.

Cryptocurrency can certainly be an excellent tool for investing: you can easily transfer it to anyone who is building something, and no one can stop you from doing this. But the cryptocurrency itself is hardly an investment. After all, it is simply an unbacked digital asset.