In efforts to boost its market-based economy, the government of Uzbekistan has decided to take initiatives favorable to the growing cryptocurrency industry.
The former Soviet nation confirmed that it is legalizing cryptocurrency exchanges and will allow blockchain companies to set up their offices in the state. The legalization came in the wake of a presidential decree that was signed to encourage the use of cryptocurrency and blockchain in Uzbekistan.
A document published at the behest of the president of the Republic of Uzbekistan, titled “On measures to organize the activities of crypto-exchanges in Uzbekistan,” revealed a set of official definitions for bitcoin-like cryptocurrencies. The state has confirmed that it will not treat cryptocurrencies like securities. Therefore, the laws that are common to security exchanges will not bother cryptocurrency exchanges.
Instead, the crypto trading businesses will come under a new set of rules, referred to as special normative acts.
Only foreign legal entities which already have a subsidiary or other enterprises in Uzbekistan will be able to open cryptocurrency exchanges. These entities will not be liable to pay taxes on their cryptocurrency turnovers. According to the text, any revenue derived in cryptocurrency will be untaxable, considering Uzbekistan will define crypto assets as a set of data records on blockchain — which they indeed are — that has value and owner.
Terms and Conditions Applied
The free perks won’t be precisely free because the Uzbekistani government has also imposed special conditions to setup crypto exchanges.
Firstly, the foreign entities must have an authorized capital to support as much as 30,000 minimum wages on the day they apply. Moreover, an equivalent of 20,000 minimum wages will have to be reserved in a state-backed commercial bank. The minimum monthly salary in Uzbekistan was close to $185 in FY2017.
Secondly, the state requires the crypto-exchanges to base their servers in Uzbekistan.
Thirdly, Uzbekistan will require the exchanges to adhere to rules for trading and publishing exchanges rates based on a demand-and-supply ratio.
Finally, the exchanges must store information on transactions, users identification, and other KYC/AML-based data for five years.
Crypto Mining Industry Also Gets a Share
The presidential decree also legalizes cryptocurrency mining in Uzbekistan and has ordered state-controlled energy companies to allocate lands for mining operations. The bitcoin mining companies will be utilizing over 100 KW/h of electricity on locations designated by the National Project Management Agency, a body governed by the President’s office itself.