Uzbekistan sets out regulatory framework for cryptocurrencies and mining

By decree of Uzbekistan’s President Shavkat Mirziyoyev, the National Agency for Project Management was transformed into the National Agency for Prospective Projects (NAPPP). It will become the main regulator in the cryptocurrency turnover sector.

The agency will be responsible for:

• development and implementation of state policy, ensuring investor rights in the cryptocurrency turnover sphere;
• promotion of projects to implement distributed ledger technology in public administration;
• development of measures to counteract the legalization of proceeds from crime, financing of terrorism and the proliferation of weapons of mass destruction through cryptocurrencies.

The NAPPP regulatory framework contains definitions of crypto assets, mining, crypto exchanges and mining pools.

According to the document, a crypto asset is a property right representing a set of digital records in a distributed ledger, having value and an owner.

From 1 January 2023, Uzbek citizens and legal entities will be able to conduct buy-sell or exchange transactions of cryptocurrencies exclusively through service providers.

These include exchanges, mining pools, crypto depositories and crypto stores. They must register their entities in Uzbekistan and obtain a license (or a certificate in the case of miners) from the agency.

The procedure for granting licenses to service providers and certificates for miners is currently under development; its approval is planned soon, ForkLog told NAPPP.

Transactions by individuals and legal entities related to cryptocurrency turnover are not subject to taxation.

Use of crypto assets in Uzbekistan as a means of payment or for receipt of payments remains prohibited.

Mining may be conducted only by a legal entity registered with NAPPP. When connected to the unified energy system, payments for electricity used for mining are subject to a double coefficient to the established tariff, with additional government-mandated surcharges applied during peak periods.

The regulation imposes a ban on stealth mining, as well as mining of “anonymous crypto assets” and deals with them.

NAPPP also establishes a special regulatory sandbox regime, under which legal entities can implement pilot projects in the cryptocurrency sector.

Sandbox participants are exempt from all taxes and mandatory contributions to state targeted funds, as well as customs duties on imported equipment or components, software and documentation, except for customs duties.

Salaries of employees of such companies in this sector will be taxed at a personal income tax rate of 7.5%.

Within the sandbox, activities related to using cryptocurrencies as a payment instrument are also prohibited.

The duration of pilot projects under the special regime is no more than three years.

Earlier in November last year, Uzbekistan amended the regulations governing cryptocurrency trading on licensed exchanges, providing residents with the opportunity to trade digital currencies.

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