The Paradox of Crackdown and Investment: Why is Kazakhstan banning illegal trading on one hand while going all-in on crypto?

Kazakhstan Financial Supervision Agency (AFM) delivered a “blood and iron” report card in 2025: freezing 20,000 money laundering cards, shutting down 22 underground crypto exchange venues, and banning over 1,100 illegal online trading services. Meanwhile, the country is quietly engaging in a national-level crypto investment—selling $300 million worth of gold to purchase Ethereum. These seemingly contradictory actions reflect a new logic in global crypto regulation.

How Big Is the Regulatory Storm

According to a work report presented to President Tokayev, Kazakhstan’s financial regulatory actions in 2025 have reached unprecedented levels:

This is not just a pile of numbers. The crackdown on 22 underground crypto exchange venues directly targets shadow economies involved in drug trafficking and scam-related money laundering. The freezing of 20,000 deposit cards indicates that money laundering activities have penetrated the very capillaries of the financial system.

Precision in Enforcement

Kazakhstan’s regulatory authorities are not simply “cutting with a machete.” The data shows their targets are very clear:

• Underground exchanges providing money laundering services for drug trafficking and scams
• Platforms engaged in illegal cash-out activities (often the exit points for scam funds)
• Personal accounts and cards used for money laundering

Behind this precise crackdown is a deep understanding of the criminal chains. Underground exchanges are not just trading venues—they are “money laundries” for criminal funds.

Why Invest in Crypto While Tightening Regulations

Related news indicates that while strengthening regulation, the Kazakh government is undertaking a bold asset allocation—selling $300 million worth of gold reserves to buy Ethereum. This apparent contradiction actually reflects a layered understanding of crypto assets:

Clear Boundaries Between Legal and Illegal

Kazakhstan’s policy logic is:

• Targets of crackdown: illegal exchanges, money laundering, scam fund exits
• Investment focus: compliant mainstream crypto assets (Ethereum)

This shows that the country is not opposed to cryptocurrencies per se, but to their use in criminal activities. Furthermore, Kazakhstan is clearing “tumors” from the market with regulatory measures while signaling its attitude through investment: crypto assets are a valuable asset class worth holding.

Signal of National-Level Investment

Last year, Kazakhstan legalized Bitcoin mining, which once accounted for 18% of global hash rate. Now, directly purchasing Ethereum indicates that the country has upgraded from “miner” to “asset allocator.” What does this mean for the market?

• Sovereign recognition of crypto asset value
• The swap of gold reserves reflects a change in asset allocation logic
• National-level investments will attract more institutional follow-up

Insights from This Regulatory Storm

Impact on the Market

Cracking down on underground exchanges and illegal trading services means blocking the outflow of illicit funds. In the short term, this will reduce the “black money” component in market liquidity. In the long term, it benefits the healthy development of the crypto market—since inflows of drug money and scam funds essentially overdraw market trust.

Industry Implications

Kazakhstan’s approach provides a model:

• Crack down on illegal activities to build market trust
• Support the development of legitimate crypto assets
• Back the market with national-level investments

This policy combination of “cracking down on illegal activities and supporting legitimate ones” could become a template for more countries.

Summary

Kazakhstan’s 2025 regulatory report card demonstrates a rational attitude toward the crypto market: both cleaning up criminal activities and seizing the opportunities of crypto asset allocation. Freezing 20,000 money laundering cards and shutting down 22 underground exchanges are concrete actions against crime; exchanging $300 million in gold for Ethereum is an investment in legitimate crypto assets. These two seemingly contradictory actions actually accelerate market segmentation—illegal activities are suppressed, legitimate assets are recognized. For the industry, this means regulation will become more precise, and markets more standardized, laying the foundation for long-term healthy development.