Uzbekistan and Cryptocurrency

In December 2019, the National Agency for Project Management under the President of the Republic of Uzbekistan (NAPM) banned the country’s residents from purchasing cryptocurrencies, resulting in a massive blow to the country’s crypto industry.[1] Residents are still permitted to hold and sell the crypto holdings that they already own, but they are required to follow extensive identification procedures to curb money laundering. Non-residents, on the other hand, were allowed to participate in the country’s first regulated cryptocurrency exchange, Uznex, which was launched by Kobea Group, a technology company from South Korea, starting January 2020.[2]

In April 2021, however, the NAPM issued an official report proposing several amendments to the licensing procedures for crypto trading, which were open to discussion until May 14, 2021.[3] First and foremost, the NAPM proposed that residents be allowed to conduct “all types of crypto exchange trades involving crypto assets and tokens in exchange for the national currency and the foreign currency,” although it emphasized that crypto investors would trade and invest at their own risk. Second, the NAPM proposed certain processes for the registration, issuance, and circulation of digital assets, authorizing licensed crypto companies in Uzbekistan to issue their own tokens.[4]

Such proposals follow two decrees from Uzbekistan President Shaukat Mirziyoyev. The first proposal focused on the introduction of measures to create a digital economy in the country in July 2018, and the second focused on measures to organize crypto-exchange activities in the country back in September 2018.[5]

Central Asian countries such as Uzbekistan have become popular locations for mining cryptocurrency due to extremely low electricity ratesand abundance of malware. Cryptocurrency mining is an energy intensive operation that uses the processing power of computers to create and verify cryptocurrencies. Cryptojackers take over one or more vulnerable computers to mine cryptocurrency without permission and without having to pay for electricity or hardware. Recent studies have found that Uzbekistan has among the top four percentages of attacks from crypto miners in the world and ranks among the fifteen least cyber secure countries in the world.[6]

[1] https://digitalcoinstandard.com/business/uzbekistan-introduces-new-proposals-to-lift-ban-on-crypto-trading-in-the-country/

[2] https://cointelegraph.com/news/uzbek-presidential-agency-proposes-legalizing-domestic-crypto-trading

[3] https://regulation.gov.uz/ru/d/44561

[4]https://cointelegraph.com/news/uzbek-presidential-agency-proposes-legalizing domestic-crypto-trading

[5] https://digitalcoinstandard.com/business/uzbekistan-introduces-new-proposals-to-lift-ban-on-crypto-trading-in-the-country/

[6] https://www.codastory.com/authoritarian-tech/crypromining-attack-security/

P.S. Insights on Cryptocurrency Legal Issues

Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.

Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.

However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.

Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency.  The globe below provides links to country-by-country summaries:

Is cryptocurrency legal in Uzbekistan?

Do you have questions about cryptocurrency, digital currencies, or blockchain technology?
Freeman Law can help with digital currencies, tax planning, and tax compliance. Contact us now to schedule a consultation or call (214) 984-3410 to discuss your cryptocurrency and blockchain technology concerns.

[1] https://digitalcoinstandard.com/business/uzbekistan-introduces-new-proposals-to-lift-ban-on-crypto-trading-in-the-country/

[2] https://cointelegraph.com/news/uzbek-presidential-agency-proposes-legalizing-domestic-crypto-trading

[3] https://regulation.gov.uz/ru/d/44561

[4] https://cointelegraph.com/news/uzbek-presidential-agency-proposes-legalizing-domestic-crypto-trading

[5] https://digitalcoinstandard.com/business/uzbekistan-introduces-new-proposals-to-lift-ban-on-crypto-trading-in-the-country/

[6] https://www.codastory.com/authoritarian-tech/crypromining-attack-security/