Kyrgyzstan halts banking operations and disables SWIFT

On 7 October, the National Bank of Kyrgyzstan recommended commercial banks and non-bank financial institutions to suspend operations amid ongoing mass protests in the country. The cross-border payments system SWIFT was also disabled.

According to the National Bank’s spokesperson Aida Karabaeva, the temporary suspension of SWIFT is intended to prevent capital flight from the country:

“The measures taken are necessary to ensure the security of the system and the safekeeping of assets. The National Bank is monitoring the situation, and as it stabilises, the banking system will resume normal operations,” — Karabaeva noted.

The regulator left open the possibility of making cashless payments via the Elcard national payment system, as well as bank cards, electronic wallets, the Elcard Mobile app and QR codes.

Earlier, Kyrgyz banks withdrew all cash from ATMs to prevent their looting.

ForkLog has requested comment from the National Bank of Kyrgyzstan and the Kyrgyz Stock Exchange.

In the absence of bank transfers, international activity and economic activity in the country will be blocked, notes Maria Agranovskaya, lecturer at Moscow Digital School and managing partner at Grad.

“Contract performance would also be at risk. Cross-border payments are a prerequisite for normal business operation,” the lawyer said.

Cryptocurrencies could potentially become an alternative asset for the population. However, this is complicated by the fact that they are not recognised as legal tender within the country.

“For small businesses and private transactions, cryptocurrencies can be a significant aid. But for large, and especially regulated, businesses, such a payment method may not be acceptable,” the expert warned.

On 5 October, after elections in Bishkek, mass protests by supporters of parties that did not pass into the republic’s parliament occurred. During attempts to disperse the rally, clashes with security forces began, and protesters stormed the Parliament building and the presidential administration of Kyrgyzstan.

Earlier, in August, Kyrgyzstan’s Ministry of Economy prepared a draft decree obliging miners to register with the tax authorities and report on their activities.

In June, Parliament passed in third reading the bill “On Amendments to the Tax Code,” providing for a 15% tax on cryptocurrency mining.

Nevertheless, in the same month the National Bank of Kyrgyzstan stressed that cryptocurrencies have no legal status, although operations with digital assets as a form of public relations in the country already exist.

Residents of some countries, faced with regulatory restrictions, are already turning to cryptocurrencies. In China, after a ban on capital outflows exceeding $50,000, the volume of transactions in Bitcoin and USDT rose sharply.

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