You Can Sell It, You Can’t Buy It: Rules of Cryptocurrency Trading in Uzbekistan

• The decree of the president of the Republic of Uzbekistan dated July 3, 2018 No. PP-3832 “On measures to develop digital economy in the Republic of Uzbekistan”
• The decree of the president of the Republic of Uzbekistan dated September 2, 2018 No. PP-3926 “On measures to organise operations of cryptoexchanges in the Republic of Uzbekistan”
• The decree of the president of the Republic of Uzbekistan dated September 2, 2018 No. PP-3927 “On establishment of the fund to support digital economy development ‘Digital Trust’”
• Cryptoexchanges licensing order regulations  (order of the National Agency of Project Management under the President of Uzbekistan dated January 21, 2019 No. 16)
• Cryptocurrency trading rules  (order of the director of the National Agency of Project Management under the President of Uzbekistan dated December 6, 2019 No. 172)

According to the Cryptocurrency Trading Rules, the residents of Uzbekistan may not buy digital currency. They are allowed only to sell cryptoassets and tokens.

This restriction is not applicable to the residents of other countries. They are free to buy and sell cryptoassets provided that they are identified and have official contracts.

Any anonymous transactions in cryptocurrencies are prohibited in Uzbekistan. In addition, cryptoassets may not be used in Uzbekistan as the means of payment. National Agency of Project Management under the President of Uzbekistan (NAPU) is the authority regulating transactions in cryptocurrencies.

Cryptocurrencies may be exchanged, bought or sold at special cryptoexchanges.

To carry out any of these transactions, you should first enter into a contract with the cryptoexchange registered in Uzbekistan. Such contracts contain the following clauses:

• Provision of information to the authorised body about possible law violations, as well as provision of information about such transactions upon the request of the authorised body;
• Audio or video recording of negotiations with customers, upon their consent, including records of correspondence, and storage of such information at least for 5 years;
• Prohibition to buy cryptocurrency for the residents of Uzbekistan.

Individuals must provide a copy of an identity document and taxpayer’s identification number in order to enter into a contract.

A sole proprietor must attach copies of identity document and state registration certificate to the contract.

A legal entity must provide a copy of state registration certificate, details of address, CEOs, as well as information specified in the constituent documents.

In addition, you should specify contact information so that the representatives of the cryptoexchange could contact the customer.

Only NAPU-licensed cryptoexchanges may operate legally in Uzbekistan. Licenses are granted only to foreign legal entities that have subsidiary companies or other companies in Uzbekistan. Moreover, legal entities-residents of Uzbekistan may not be shareholders in the authorised capitals (funds) of such companies.

Today Uzbekistan has only one cryptoexchange that was licensed at the end of December 2019 — UzNEX. This is the project of the Korean Kobea Group.

All licensing requirements and conditions are specified in the Cryptoexchange licensing order regulation:

• The authorised capital must be at least 30 thousand basic estimated values (nearly 700 thousand dollars), including 20 thousand (nearly 467 thousand dollars) shall be reserved on a separate account in a commercial bank of Uzbekistan;
• Availability of a functioning electronic cryptoexchange system located on servers inside the country;
• Valid cryptoexchange trading rules (procedure for admittance to trading, fee rates, registration of transactions, etc.);
• Storage of information about transactions, identity information of customers, materials about relationships with them, including business correspondence, for 5 years;
• Other requirements specified by the law.

According to the decree of the president on the measures to organise operations of cryptoexchanges in Uzbekistan, all transactions related to the turnover of cryptoassets are not taxable. All profits earned from such transactions are exempt from taxation and other mandatory payments.

The norms of the law on currency regulation do not apply to transactions in cryptocurrencies carried out by persons who are properly licensed. Moreover, the law on securities, exchanges and exchange activities does not apply to the cryptoassets turnover and activities of cryptoexchanges.

In case of cryptocurrency buying by individuals who are residents of Uzbekistan, as well as in case of purchase and sale via cryptoexchanges that are not licensed by NAPU, violators may be held liable.

In June 2020, a complaint was lodged against a resident who carried out illegal transactions via Telegram, namely bitcoin buying and selling in the amount of 3 million dollars. The case was opened on articles 177 (“Illegal buying or selling of currency assets”) and 190 (“Carrying out unlicensed activities”) of the Criminal Code of Uzbekistan that carry punishment up to seven years in prison.

In March 2021, two residents were detained in Tashkent for making an illegal transaction, namely buying and selling bitcoins for the amount of approximately 24 thousand dollars. They were charged with the same violations as in the case above.

Uzbekistan allows mining of cryptoassets. According to the law, land plots are provided for large-scale mining (more than 100 kWh) in special areas without electronic auctions. The list of such areas is determined by Uzbekenergo and Uzbekgidroenergo jointly with NAPU, chair of the Council of Ministers of the Republic of Karakalpakstan, khokims of regions and the city of Tashkent, respectively.

At the end of 2019, the Electric Power Usage Rules were added with a clause that set forth special triple rates for miners. However, in October 2019, a group of miners recorded a video message to the country’s management, where they expressed their fear that the escalation of rates would make the industry unprofitable. In January 2020, the administration of NAPU stated at the press conference that they would create the National Mining Pool with general rates. The respective draft decree was published in the same month on the website that discuss draft laws and regulations. According to the draft decree:

• Since February 1, 2020, large-scale mining activities must be licensed, while private mining activities bind the miner to register via getting the status of a participant in the mining pool;
• Membership in the mining pool is mandatory for large-scale and private miners.

The decree has not been adopted so far, for reasons unknown. Therefore, miners of Uzbekistan pay for electricity three times more than the general rate.