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Digitalization at the Astana International Financial Center: How Technology Transforms Financial Services?
Ramadan Khairullin CEO Law Council Group
Introduction Digitalization plays a key role in shaping the ecosystem of the Astana International Financial Centre (AIFC), ensuring transparency, accessibility and efficiency of financial services. The Center actively uses advanced technologies for interaction between its bodies and participants. These initiatives are in line with global trends of digitalization in financial centers and create unique opportunities for local and international participants. Main platforms and their functionality: 1. eJustice 2. The eJustice platform provides AIFC participants with the ability to interact remotely with the IFCA Court and the International Arbitration Center (IAC). o Functionality: filing claims, uploading evidence, tracking case status, and participating in hearings via videoconferencing. o Efficiency: the platform reduces dispute resolution time by making the process accessible to international actors. 3. NASDAQ-based AIX platform 4. Astana International Exchange (AIX) uses the NASDAQ trading platform, which allows to ensure high speed, transparency and reliability of trades. o Instruments: listing of stocks, bonds and ESG instruments. o Advantages: integration with global settlement systems Clearstream and Euroclear, which makes Kazakhstan's capital market accessible to international investors. Thus, digital technologies ensure coherent work between AIFC bodies: · Legal support: eJustice is directly linked to the MFCA Administration to coordinate disputes. · Trading activities: AIX solutions are supported by AFSA technologies and the MFCA Court to comply with regulatory requirements and protect the rights of participants.
Benefits of digitalization for AIFC participants The introduction of digital technologies into the AIFC ecosystem provides participants with many benefits, increasing the convenience, transparency and efficiency of interaction. These benefits not only improve the quality of services provided, but also create an attractive environment for international investors. 1. Reduction of administrative barriers Digitalization simplifies complex bureaucratic processes and minimizes human involvement in administrative tasks: · Through digital interactions between AIFC bodies such as AFSA and AIX, participants access services faster and without delay. 2. Time and cost savings Automated processes reduce costs for companies and shorten service delivery times: · eJustice makes it possible to file a claim with the MFCA or IAC Court online, avoiding the costs of logistics and lengthy legal procedures. · Participation in court proceedings via videoconference reduces travel and venue rental costs. 3. Increased transparency AIFC’s digital platforms provide full transparency of transactions, which builds investor confidence: · Real-time information on quotes, trading volumes and issuers is available on the AIX platform. · AFSA publishes all regulations and requirements on its online resources, giving members access to up-to-date information. 4. Accessibility of services for international participants Digitalization makes AIFC attractive to foreign companies and investors by providing remote access to all key services: · Trials through eJustice and AFSA counseling are available to participants from anywhere in the world. · The AIX platform is integrated with Clearstream and Euroclear global settlement systems, which facilitates the participation of international investors in the Kazakhstani market. Dynamics of FinTech Lab development in AIFC In order to find out how these advantages affect the dynamics of AIFC development, it will be necessary to look at the development of the Fintech Lab, analyzing the number of participants since its inception and making a comparative analysis with the total number of AIFC participants. The analysis below was made thanks to the public database made available on the AFSA website, and we focused specifically on the Fintech Lab, as its participants demonstrate the implementation of advanced digital solutions that are the foundation for modernizing the financial sector. Over the course of seven years, the Fintech Lab has demonstrated stable development. However, against the background of a general increase in the number of registered companies in AIFC, the share of Fintech Lab participants has been less stable, which requires special attention. In 2018, the total number of registered companies in AIFC was 94, of which 7 represented the Fintech Lab. At that time, this represented 7.4% of the total number of participants, which emphasized the importance of the Lab in the emerging ecosystem. However, already in 2019, despite the increase in the total number of companies to 264, the share of fintech companies has decreased to 3.4%. This indicates that other sectors have started to integrate more actively into the AIFC. In the following years, there was a steady increase in the total number of companies. In 2020, their number reached 294, and in 2021 - already 549. At the same time, the number of fintech companies grew more slowly: in 2020 there were 9, and in 2021 it increased to 11. In percentage terms, this amounted to 3.1% and 2.0% respectively, reflecting a slowdown in the growth rate of the share of fintech companies against the backdrop of an overall upturn in the number of participants. 2022 and 2023 showed similar trends. Despite a steady increase in the total number of registered companies - 570 and 681 respectively - the share of Fintech Lab participants continued to decline, amounting to 1.6% and 1.3%. This trend continued in 2024, which was a record year in terms of the number of registrations - 1,044 companies. However, the number of fintech participants increased only slightly to 10, accounting for only 0.96% of the total.
Table 1: Analysis of total number of AIFC participants by sector and year Table 2. Comparative analysis of the number of Fintech Lab participants with the total number of AIFC participants by year During this period, certain areas in which FinTech Lab participants are more inclined to operate have also emerged: · Investment trading as an agent (13 companies) · Provision of custodial services (18 companies) · Operating exchange (6 companies) · Investment management (5 companies) The above analytical data show that despite the growth of the total number of companies in AIFC, the rate of increase of Fintech Lab participants lags behind the dynamics of other sectors. At the start of its activity, the Lab occupied a significant share, but as the center developed, its influence began to decline in relative terms. Questions regarding the determinants of this trend remain open and the factors below may be some of the reasons for our assumptions: Funding: Access to investment and grants is key. If funding for the sector is limited, it reduces the attractiveness of the Lab for new entrants. On the contrary, active funding stimulates the influx of innovative companies. COVID-19: Pandemic has increased demand for digital services and accelerated the shift to remote operations. However, uncertainty and economic constraints may have held back the creation of new fintech companies. Demand for fintech services: Increasing or decreasing interest in technology in the financial sector directly affects the number of participants. If the market is saturated, the rate of growth in the number of new companies may slow down. Shifting focus to other areas: AIFC is actively developing other sectors such as investment funds, securities market and sustainable finance. These areas may compete with fintech for resources and attention from investors and new entrants. Regulatory support and initiatives: AIFC's policies related to regulatory simplification, accelerator programs and support for startups also influence FinTech Lab's attractiveness. Lack of such initiatives may slow down the influx of companies. International competition: Financial centers such as Dubai or Singapore offer more advanced infrastructure and global connectivity, which may steer potential entrants away from AIFC. Nevertheless, Fintech Lab's contribution to the development of the AIFC ecosystem remains significant. It brings together companies specializing in key areas such as asset management, custodial services, trading platforms and investment advisory. These areas are in line with global trends and strengthen the role of AIFC as an innovation hub. Disadvantages of digitalization in the AIFC system Despite all the opportunities of digitalization, there are several disadvantages: · Cyber risks: The increase in the number of transactions through digital platforms is accompanied by security threats such as cyber attacks or data breaches. · Limited platform awareness: AIFC continues to work to promote its digital solutions to the international community, but the current awareness of the Center remains below the level of major competitors such as Dubai or Singapore, which may be visible in the Fintech Rank and Rating indicators in the Global Financial Centres Index 36 international report for 2024. Recommendations for improvement · Increased investment in cybersecurity: Platforms such as eJustice and AIX need to be better protected to prevent potential threats. · Promotion among local actors: Digital literacy programs and marketing of digital solutions can increase the engagement of local companies. · Development of advanced technologies: The introduction of artificial intelligence, blockchain and other innovations can strengthen AIFC's position on the international stage.
Conclusion AIFC has already established an important place in the global financial ecosystem and further digitalization will strengthen its position as the region's leading financial center. The introduction of advanced technologies will not only improve the quality of services provided, but also ensure sustainable development in line with the expectations of the international community.
Liability exclusion
This material is for general informational purposes only and does not constitute legal or professional advice. No part of this document should be relied upon or used as a substitute for legal consultation. Please note that legal standards and practices may have changed since the publication date. For any questions, feel free to contact us via WhatsApp at +7 (707) 384 83 52 or email at info@lcg.kz.
Reference list: Astana Financial Services Authority (AFSA). (n.d.). FinTech public register. Retrieved from https://publicreg.myafsa.com/fintech/?company=&license_number=&license_status=&activities=4&products= Astana Financial Services Authority (AFSA). (2024). RegLab: Supporting FinTech innovation. Retrieved from https://afsa.aifc.kz/ Astana International Exchange (AIX). (2024). Technological infrastructure and NASDAQ integration. Retrieved from https://aix.kz/ Wardle, M., & Mainelli, M. (2024). Global Financial Centres Index 36 (GFCI 36). Z/Yen Group Limited. Parliament of the Republic of Kazakhstan. (2015). Constitutional Law of the Republic of Kazakhstan «On the International Financial Center «Astana» (with amendments and additions as of April 1, 2023).
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