Promoting Gold-Backed Stablecoins, Inviting CZ as Web3 Advisor
Central Asian country Kyrgyzstan is quietly rising as a nation worth paying attention to in the exploration of crypto innovation.
On April 15, the Kyrgyz government officially announced that the National Investment Agency, directly under the president, signed a strategic Memorandum of Understanding (MoU) with Binance founder Changpeng Zhao (CZ), officially appointing CZ as the official advisor on national blockchain development, cryptocurrency regulation, and Web3 innovation. This news was confirmed earlier on April 3 by Kyrgyz President Sadyr Zhaparov on the X platform.
With CZ officially appointed as an advisor, Kyrgyzstan’s national blockchain strategy is set to accelerate.
According to the signed MoU, CZ will provide forward-looking framework guidance for the Kyrgyz government in the digital asset field, including technical support for blockchain infrastructure and policy formulation. This cooperation will also focus on talent cultivation and expedite the construction of an innovative environment for DeFi and Web3 technologies.
Interestingly, on April 4, in response to community rumors that “Kyrgyzstan is planning to establish a national cryptocurrency exchange and will provide two buildings for trading halls,” CZ clarified on the X platform: “No buildings were provided, what kind of digital currency exchange uses buildings for trading halls?”
On April 7, President Sadyr Zhaparov replied, “I have been busy with the Central Asia-EU summit these days and finally have time to read comments today. I am really glad to see everyone’s interest in Kyrgyzstan! Some comments mentioned that someone promised to cooperate to build a building. I am not sure who promised what to whom — but if Binance needs a building, we will ensure that there is one.”
Although the confirmation of a shared office building has yet to be determined, the cooperation between the two parties has clearly intensified.
According to the official announcement, the signing of the MoU aligns with Kyrgyzstan’s overall strategy to modernize its financial system and build a regional digital innovation center. According to an official statement from the president’s office, the development of blockchain and digital finance has been prioritized as a national priority.
“We welcome global leaders with deep expertise who can help build a forward-looking and secure ecosystem,” said Kyrgyz President Sadyr Zhaparov. “Blockchain and digital finance are priority development areas for the nation, and this cooperation marks a meaningful step forward.”
In addition to regulatory efforts, the MoU also proposed multiple support measures covering education, workforce training, and cross-border knowledge exchange in blockchain-related fields. These initiatives aim to promote the development of the national entrepreneurial ecosystem and align Kyrgyzstan’s virtual asset regulation with global best practices.
This cooperation comes against the backdrop of Kyrgyzstan’s continuous advancement in crypto finance over the past three years. Since the enactment of the “Virtual Assets Law” in 2022, which established a clear legal framework for crypto activities, the country has demonstrated its readiness for cryptocurrency adoption by initiating a national crypto bank and integrating blockchain technology into its banking system, digital payments, and financial regulation. According to Kyrgyz law, Bitcoin is considered a commodity rather than a security or currency. On local commodity exchanges, mining, buying, and trading Bitcoin are all legal. However, using Bitcoin as currency for domestic settlements is restricted.
According to a report by Central Asia Times on January 7, 2025, interest in cryptocurrencies among individuals and businesses in Kyrgyzstan is rising; however, overall market regulation remains weak.
“Given the rapid development of digital technology and cryptocurrencies, establishing a crypto bank has become an urgent need to incorporate crypto assets into the country’s traditional financial system,” stated Kyrgyzstan’s Ministry of Economy and Commerce.
The ministry believes that establishing a licensed crypto bank will help address these challenges and enhance market transparency, trust, and financial security. Through this initiative, Kyrgyzstan hopes to attract foreign investment, promote technological innovation, and provide citizens with secure, regulated channels for cryptocurrency usage.
Kyrgyzstan’s strategy focuses on “licensed crypto banks,” which is unique. The relevant banks will operate under a strict regulatory framework to ensure system transparency and security.
The decision to promote the establishment of a licensed crypto bank stems from a high emphasis on risk control. These institutions will comply with stringent regulatory requirements to safeguard user funds and personal data. Moreover, regulatory intervention will help combat money laundering, fraud, and other illegal activities. By integrating cryptocurrencies into the banking system, Kyrgyzstan aims to provide modern financial services to underserved populations.
Kyrgyzstan has also imposed taxes on crypto mining. The country levies a 10% tax rate on the electricity cost associated with cryptocurrency mining activities, which includes value-added tax and sales tax. According to the Ministry of Finance, from January to November 2024, Kyrgyzstan collected a total of 46.6 million soms (approximately 537,000 USD) from crypto mining taxes, which is close to half of the total amount for the entire year of 2023.
Launching Gold-Backed Stablecoins, What Are the Highlights of USDKG?
In addition to regulatory and policy efforts, Kyrgyzstan is also exploring the combination of technology and assets. An important case is the launch of the gold-backed stablecoin USDKG, a stablecoin project supported by the Ministry of Finance and anchored to gold reserves, which is regarded as one of the pillar projects in Kyrgyzstan’s blockchain strategy.
In a recent AMA, the project’s two advisors, William Campbell and Gabriel Guerra, provided more detailed information about the project. The credibility of USDKG stems from its state-supported structure. The stablecoin is issued only based on newly added gold reserves, thus preventing arbitrary issuance and inflation risks. The initial total value of gold collateral is 500 million USD, expected to increase to 2 billion USD within 24 months, further solidifying its long-term stability.
Transparency is a core principle in the design of USDKG. Each USDKG is backed by physical gold, with the gold stored in audited secure vaults. Regular third-party audits and a public reserve proof system ensure complete transparency. This distinguishes USDKG from private stablecoins that are often questioned due to opaque reserve management.
The spokesperson clearly outlined the state’s role in the project. “The role of the Kyrgyz Ministry of Finance is limited to providing gold reserves. The rest of the development, auditing, and maintenance are carried out by private companies and individuals,” Campbell clarified.
USDKG will initially launch on Ethereum and plans to expand to other chains as adoption grows. “We are creating an international asset, and the long-term vision is to compete with major stablecoins like USDC and USDT,” Campbell said.
USDKG is not only a means of value storage but also holds the potential to become an important tool for trade, cross-border transactions, and remittances. For countries like Kyrgyzstan, which heavily rely on overseas remittances, USDKG offers a low-cost, high-efficiency alternative to traditional banking. Furthermore, USDKG is designed to operate on both centralized and decentralized exchanges, ensuring its wide accessibility and usability by institutions and retail investors alike.
Kyrgyzstan’s stablecoin is positioned as a solution for cross-border payments, as remittances account for approximately 30% of the country’s GDP. By integrating into the financial ecosystem, USDKG enables instant, low-cost international transactions, making it easier for overseas workers to remit money back home.
The first step in integrating USDKG into the local financial system will be connecting it to Kyrgyz banks and institutions, making it legal tender in the country. Once this foundation is established, it will expand to other Central Asian markets. “The Central Asian market is undoubtedly a target, but we are also interested in Southeast Asia and the Middle East, where gold support holds significant economic and cultural value,” Guerra said.
USDKG will also be listed on global cryptocurrency exchanges, allowing for lending, yield farming, and other activities. According to Campbell, users will have three redemption options: “Anyone holding USDKG can exchange it for physical gold in Kyrgyzstan, convert it into cryptocurrencies like USDT, or withdraw legal tender through the traditional banking system.”
Competing with Neighbors, Crypto Regulatory Framework Becomes New Focus of Economic Policy in Central Asian Countries
It is worth noting that Kyrgyzstan is not the only Central Asian country stepping into regulatory exploration. A recent call by a member of the lower house of Kazakhstan’s parliament urged the government to establish a national crypto bank as a centralized platform for legal digital asset custody and trading. Lawmaker Azat Peruashev stated that the lack of a clear regulatory framework has led to the growing incidence of illegal crypto activities, with most transactions occurring outside the official regulatory system. He believes that a state-led institution would help curb tax evasion, fraud, and capital flight through unregulated platforms.
Peruashev proposed involving the national bank and licensed financial institutions in the project, defining it as a necessary measure to address the widespread abuse of crypto assets. He cited unofficial data indicating that up to 90% of crypto transactions in Kazakhstan occur in the “gray area,” with massive capital flowing out of the country unchecked.
Meanwhile, Uzbekistan has legalized crypto trading and established a national regulatory mechanism to manage the industry. Another future development to watch is whether Kyrgyzstan will follow in El Salvador’s footsteps by designating Bitcoin as legal tender, given the established and friendly regulatory environment surrounding cryptocurrencies.
The accelerated investment of several Central Asian countries in the crypto industry and related regulatory policies marks a shift in national attitudes toward digital infrastructure — it is no longer seen merely as a financial tool but as a means of national governance. Blockchain technology is being incorporated into the overall planning of national modernization and geopolitical strategy, and subsequent developments warrant further attention.
This article is co-published from: PANews