Uzbekistan Publishes Crypto Regulation Framework, Assigns Supervising Agency

Uzbekistan President Shavkat Mirziyoyev set a regulatory framework for the country's crypto industry and assigned a newly renamed Perspective Projects Agency to oversee the industry.

In a directive published April 27, Mirziyoyev said cryptocurrency exchanges, mining pools and crypto custodians operating in the Central Asian republic must be registered locally.

As of Jan. 1, 2023, Uzbekistan residents will be able to buy or sell crypto only on the local exchanges, which must verify the identity of users through a know-your-customer process and store data about all the transactions for five years. Crypto service providers aren't allowed to facilitate trading with "anonymous crypto assets," a term not explained in the document.

The agency, formerly the National Agency for Project Management, takes on the crypto industry after being restructured and assigned new responsibilities. It will develop new policies for crypto and make sure it's not used for money laundering and terrorism financing, the directive says.

The agency, which will be funded by grants, donations and loans, will also create a regulatory sandbox for cryptocurrency projects. That will allow the projects to operate without a license and enjoy a favorable tax treatment for three years. After that, the projects should either become full-fledged regulated businesses or shut down. The agency's director will be assigned by the president.

The directive also requires cryptocurrency miners to use only solar energy from dedicated power plants. Miners that plug into the national grid must pay twice the regular price.

Uzbekistan is a former Soviet republic that gained independence after the collapse of the Soviet Union. The country shares a border with Kazakhstan, formerly a leader in cryptocurrency mining. Mirziyoyev, who was elected president in 2016, is considered a more open and pro-innovation leader than his predecessor, Islam Karimov.