Uzbekistan is yet another country that’s done crypto ‘about turn’ and has gone from restricting crypto activity to now looking to expand and develop the nation’s crypto economy. This involves lots of grand decrees and announcements with the officially stated aim of creating and developing digital currency and a blockchain enterprise hub for entrepreneurs. Legislation that has been lacking is set to improve in accordance with the new aims.
Just a few years back, the National Agency for Project Management within the Republic of Uzbekistan NAPU – now replaced by the Perspective Projects Agency PPA to oversee the industry – had banned residents from purchasing crypto, a big blow at the time but thought necessary to curb money laundering. Non-residents, however, were still allowed to participate in the country’s first regulated crypto exchange, the Uznex. Under the new direction, residents are allowed to conduct crypto exchanges and trading at their own risk. In line with this are designated systems of registration, issuance, and circulation of digital assets along with the authorizing of licensed crypto companies to issue their tokens. The country now stands, like many others on the brink of a crypto expansion.
The new PPA is dedicated to developing new policies for crypto to combat money laundering and create a regulatory sandbox for cryptocurrency projects. Under this edict, projects will be able to operate without a license and gain tax concessions for a short to medium-term period, following which they qualify to become fully regulated businesses (or be dismissed).
Taxation appears to be a moveable feast. Crypto miners in Uzbekistan looking to avoid new moves to double their electricity bills, and also get a break on their taxes have been given the option of buying and installing solar panels. Thus, those crypto miners that employ solar panel energy will be exempt from paying Uzbekistan income tax. Those who still suck power out of the national grid will have to pay double regular prices, plus tax plus added charges during peak hours. So, get those solar panels up and running boys!
Uzbekistan had become a busy center for the mining of cryptocurrencies, just like other diverse locations such as Iceland and Kazakhstan. Formerly cheap and ready supplies of the electricity needed for the activity fuelled this activity but this has now changed (see above) and electricity is charged more highly to mining operations. Unfortunately, crypto hijacking has been prevalent in the country, this is where vulnerable mining operations are hijacked without consent and without electricity costs being paid. The result is that the country has one of the highest percentages of crypto-mining attacks anywhere.
Today, the potential of the digital economy and blockchain technologies is extremely promising. A long-standing decree given by the country’s President looked to promote the activity of companies in the field of crypto and blockchain technologies. The result is that these technologies are being introduced to the public sector on the basis of public-private partnerships. Pushing this new technology into the most potentially rewarding and strategically important projects is what is driving the digital economy. The promotion and development of blockchain technologies is, like so many countries around the world, one of the most pressing priorities of the Uzbekistan government and its institutions.
No surprise that the country has a number of crypto and blockchain educational courses available, all dedicated to helping professionals understand the advantage of blockchain currencies like Bitcoin and Ethereum along with learning on applications and programming based on Blockchain technology.
Initial Coin Offerings
Recently, Uzbekistan started to be another one of the countries leading the discussions on how to regulate Security Token Offerings (STOs). The nation’s effort to become more crypto-friendly looks like the efforts are starting to pay off and along with crypto exchanges regulation, the country is keen to promote blockchain startups. The country’s Digital Trust initiative is looking more favourably towards security token offerings STOs, than Initial Coin Offerings ICOs, as the latter are deemed to be less legitimate, possibly due to the bad reputation they gained in the early days.
According to the new regulations, residents of Uzbekistan can buy, sell, and exchange crypto assets domestically for their national currency. Non-residents are allowed to exchange cryptocurrencies for foreign fiat as well. However, the use of cryptocurrencies as a means of payment for goods and services is still prohibited (similar to Russa) and the Central Bank of Uzbekistan completely ruled out the proposal that Bitcoin would ever become legal tender.
Transparency and Security
Crypto exchanges, mining pools, and virtual asset service providers VASPs are required to become registered at a local level and residents can trade, buy or sell crypto-only on the local exchanges. These must verify the identity of users through the know-your-customer process – which has become increasingly common throughout the world in order to combat money laundering.
Exchanges and service providers are required to store transactional data for some 5 years – so quite strict – and crypto service providers must not facilitate trading with undisclosed agencies or asset providers.