On 27 April 2022, the President of Uzbekistan signed decree No. UP-121 (the “Decree”), which (i) reorganized the National Agency for Project Management into the National Agency of Perspective Projects (the “Agency”) and authorizing it to regulate circulation of crypto-assets in Uzbekistan (covering issuance, registration, and circulation of crypto-assets by residents of Uzbekistan), and (ii) established a special regulatory regime in the sphere of crypto-asset circulation.
According to the Decree, only legal entities are entitled to engage in mining1 of crypto-assets2 in Uzbekistan, following compulsory e-registration with the Agency. Mining of crypto-assets does not require obtaining a license.
The Decree requires miners to carry out mining activity exclusively at the address indicated in their e-registration, in compliance with fire safety and sanitary norms and following installation of a separate metering device. Miners may use electricity either (i) produced by a solar power plant, or (ii) if connected to a single electrical grid, subject to a double tariff for electricity and a higher tariff during peak periods, as determined by the Cabinet of Ministers.
The Decree further establishes a special regulatory regime, a so-called “regulatory sandbox” regime (the “Special Regime”), creating a platform for testing and implementation by legal entities of selected pilot projects that utilize new technologies in the field of crypto-assets (the “Pilot Projects”).
The Decree instructs the Agency to grant “Pilot Project” status under the Special Regime only to legal entities that are engaged in “introducing technologies in the field of circulation of crypto-assets”. The Decree does not elaborate on what does “introducing technologies” mean; it is yet to be clarified by the Agency which is authorized to (i) develop and implement policies in relation to circulation of crypto-assets and (ii) issue regulations on registration of crypto-asset mining and on registration of companies implementing projects under the Special Regime.
The Decree further provides the following benefits to Pilot Projects implemented under the Special Regime:
- exemption from paying all types of taxes and mandatory contributions to state funds;
- exemption from customs payments (except for customs fees) relating to equipment imported for their own needs, components, accessories, spare parts, assemblies, technological documentation, and software that are not produced in Uzbekistan, according to the list that will be approved separately by the government;
- income in the form of wages received by employees under employment contracts with companies operating under the Special Regime is subject to tax at a flat rate of 7.5% and is not included in the total annual income of individuals determined for tax purposes.
Together with this, the Decree prohibits implementation of projects under the Special Regime aimed a the use of crypto-assets on the territory of Uzbekistan as means of payment or payment acceptance tools. The term for implementation of Pilot Projects under the Special Regime shall not exceed 3 years.
Changes in the country's regulations come amid the rise of crypto-mining in the region. In particular following imposition of a ban on crypto-mining in mid-2021 by China, crypto-miners were forced to leave China. M found shelter in Kazakhstan, being lured by the then existing tax incentives (as crypto-mining was entirely tax free) with relatively cheap electricity.3 Following the January events in Kazakhstan as well as power cuts due to aging coal power plants4 and rising energy rates for crypto-miners5, crypto-miners there faced the dilemma to stay in the country or leave it trying to find a new shelter.
It appears that the government of Uzbekistan aims to create a favorable ecosystem for crypto, including mining activity.
1 The “mining” in the Decree means “…an activity of maintaining a distributed data registry, creating and confirming the integrity of blocks through conducting computational operations”;
2 The “crypto-assets” in the Decree means “…a property rights encompassing a set of digital records in a distributed registry, which has a value and an owner”.
3 Lexology. 2022. Cryptocurrency mining in Kazakhstan: Protections for Foreign Investors. [online] Available at: [Accessed 6 May 2022].
4 The Economic Times. 2022. Kazakhstan's bitcoin 'paradise' may be losing its lustre. [online] Available at: [Accessed 6 May 2022].
5 Lexology. 2022. Cryptocurrency mining in Kazakhstan: Protections for Foreign Investors. [online] Available at: [Accessed 6 May 2022].
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