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Crypto legislation in Uzbekistan: overview
Khamdambek ATAJANOV
1
Tashkent State University of Law
ARTICLE INFO
ABSTRACT
Article history:
Received July 2023
Received in revised form
15 July 2023
Accepted 25 July 2023
Available online
15 August 2023
This article reviews the current legislation in the sphere of
cryptocurrency regulation in Uzbekistan. The main emphasis is
given to the government outlook, the functions and role of the
regulatory div, the direction of regulation, basic used terms
and definitions, and taxation of the subjects of the
cryptocurrency market. This article will benefit the experts
working in cryptocurrency legislation.
2181-
1415/©
2023 in Science LLC.
DOI:
https://doi.org/10.47689/2181-1415-vol4-iss6/S-pp347-352
This is an open access article under the Attribution 4.0 International
(CC BY 4.0) license (https://creativecommons.org/licenses/by/4.0/deed.ru)
Keywords:
cryptocurrency,
cryptocurrency regulation
legislation,
crypto-asset,
financial services
O'zbekistonning kriptovalyuta qonunchiligi: sharh
АННОТАЦИЯ
Калит сўзлар:
kriptovalyuta,
kriptovalyutani tartibga
solish sohasidagi
qonunchilik,
kripto-aktiv,
moliyaviy xizmatlar
Ushbu maqolada O‘zbekistonda kriptovalyutani tartibga
solish sohasidagi amaldagi qonunchilik muhokama qilinadi.
Asosiy e'tibor davlatning qarashlari, tartibga soluvchi organning
funktsiyalari va roli, tartibga solish yo'nalishi, ishlatiladigan
asosiy atamalar va ta'riflar, kriptovalyuta bozori sub'ektlarini
soliqqa tortishga qaratilgan. Ushbu maqola kriptovalyuta
qonunchiligi sohasida ishlaydigan mutaxassislar uchun foydali
bo'ladi.
1
Senior Lecturer, Tashkent State University of Law. E-mail: hamdambek@gmail.com
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Криптовалютное законодательство Узбекистана: обзор
АННОТАЦИЯ
Ключевые слова:
криптовалюта,
законодательство в сфере
регулирования
криптовалюты,
крипто
-
актив,
финансовые услуги.
В данной статье рассматривается действующее
законодательство в сфере регулирования криптовалюты в
Узбекистане. Основной акцент сделан на взглядах
государства, функциях и роли регулирующего органа,
направлении регулирования, основных используемых
терминах и определениях, налогообложении субъектов
криптовалютного рынка. Эта статья будет полезна
специалистам, работающим в области криптовалютного
законодательства.
In recent years, rapid technological advances have resulted in a sea change to the
way most of the world conducts and regulates financial services [1]. As Professor
Hileman has observed: “Many policymakers are seeking to gain a better
understanding of
the likelihood that the use of bitcoin (or other cryptocurrencies) will gather momentum
in their respective jurisdictions” [2]. Regulation of cryptocurrencies and blockchain
technology has long been debated in Uzbekistan, as to what kind of regulation (soft or
hard) to implement. In the end, the government decided to choose a more careful way of
regulating this sphere. The most important point is that the government defined
cryptocurrencies as assets, not as a means of payment or securities. According to the
latest definition, a crypto-asset is a property right, which is a set of digital records in a
distributed data registry, which has a value and an owner.
But the question of whether a crypto-asset is (or can be issued, and traded) as a
financial instrument (securities) or when crypto-assets can be considered securities
remains open.
In European Union, with the adoption of MICA (May 2023), the regulation
distinguishes the following types of crypto-assets, e-money tokens (crypto-assets that
stabilize their value in relation to a single official currency); asset-referenced tokens (crypto-
assets that stabilize their value in relation to other assets or a basket of assets); crypto-assets
other than asset-referenced tokens or e-money tokens (e.g. utility tokens) [3].
In this article, we shall review the legislation of Uzbekistan and discuss some of the
characteristics of regulation of this sphere.
I. Regulatory div
The main regulatory div of the crypto sphere is The National Agency of
perspective projects of the Republic of Uzbekistan (hereinafter referred to as the Agency)
which was established in 2017 [4]. The responsibility of this organization includes the
development and implementation of a unified state policy in the sphere of crypto-assets
and their circulation. Moreover, this organization should assist in initiating and
promoting projects to introduce distributed ledger technology and other cutting-edge
technologies to public administration and different socio-economic sectors.
II. Legislation
The first time that the government of Uzbekistan began taking steps to regulate
cryptocurrencies and other blockchain technologies was in 2018. On July 3, 2018 the
President of Uzbekistan Shavkat Mirziyoyev adopted the resolution No. RP-3832
“On measures to develop the d
igital economy and the sphere of crypto-assets circulation
in the Republic of Uzbekistan”.
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On 27 of April, 2022, the President of Uzbekistan adopted a Decree No. DP-121 which
dramatically changed the regulation of crypto technologies in Uzbekistan. According to the
Decree, the Agency establishes a Special Regulation Regime in the Sphere of Crypto Assets
Circulation (Special Regulatory Sandboxes Regime), which provides for the creation of
special organizational and legal conditions for legal entities implementing technologies in
the sphere of crypto assets circulation. Participants of the special regime, after registration in
accordance with the established procedure, carry out the implementation of pilot projects
without obtaining licenses and permits in the field of circulation of crypto-assets. As part of
the implementation of pilot projects in a special regime, there are benefits and preferences
provided for by legislative acts. The term for the implementation of pilot projects under the
special regime is no more than three years.
Moreover, according to this decree, the resolution No. RP-3832 was also cardinally
changed
*
. The new changes defined the main directions of legislation, such as
implementation and development of activities in the sphere of crypto-assets circulation,
including mining, consulting, emission, exchange, storage, distribution, management,
insurance, as well as distributed ledger technologies for diversifying various forms of
investment and business activities.
This document also gave definitions to some terms in these spheres. For instance,
mining
was defined as ‘activities to maintain the distribution platform and create new
blocks with the ability to receive remuneration in the form of new units and commission
fees in various crypto-assets,
smart contracts
were defined as an agreement in
electronic form, the fulfillment of rights and obligations under which is carried out by
automatically making digital transactions.
This document also created a legal ground for mining, which was in between for a
long time, and there emerged some special rules regarding mining. For example, it was
established that mining is subject to mandatory registration by the Agency and is not a
licensed activity. But the peculiar part of the regulation is that mining should be carried
out
exclusively
by a legal entity using electricity produced by
a solar photovoltaic
station.
But miners operating with the use of equipment and installations of solar
photovoltaic stations have the right to enjoy tax, customs, and other benefits and
preferences in the field of the use of renewable energy sources in the manner prescribed
by legislative acts.
This resolution also establishes legal grounds for the activities of service providers
in the sphere of the purchase, sale, and (or) exchange and management of crypto-assets.
Service providers can only be legal entities
–
residents of the Republic of Uzbekistan.
There are four types of service providers according to the resolution:
1) crypto-exchange
–
an organization that provides an electronic platform for the
purchase, sale, and (or) exchange of crypto-assets;
2) mining pool
–
an organization that provides an electronic platform for the
consolidation of computing power to support the mining process;
3) crypto-depository
–
an organization that provides an electronic platform and
(or) a set of technical and software tools for the provision of services for the issuance of
crypto-assets, their initial placement, and storage;
*
According to the legislative tradition, in Uzbekistan the President adopts a decree which is higher in ranking, then all
other lower legislative acts will be changed (adapted) to it.
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4) crypto-shop
–
an organization that provides an electronic platform and (or) a
set of technical and software tools for the provision of services for the purchase and (or)
sale of crypto-assets [5].
The activity of the service provider is licensed or registered by the Agency and
there are specific requirements for getting the license (permission):
–
the presence of an electronic platform and (or) a set of hardware and software
located on servers located in the territory of the Republic of Uzbekistan;
–
storage for five years of information on all transactions with crypto-assets, on
identification data of platform participants, materials on the relationship between the
service provider and platform participants (including between platform participants),
including business correspondence;
–
compliance with the requirements of the legislation of the Republic of Uzbekistan
in the sphere of crypto-assets turnover, countering the legalization of proceeds from
crime, the financing of terrorism and the financing of the proliferation of weapons of
mass destruction, as well as the storage and use of personal data;
–
compliance with the requirements for advertising in the sphere of crypto-assets
turnover, including the prohibition of promising the effectiveness (profitability) of
activities related to the use of crypto-assets, the content of information about
transactions with crypto-assets as an easy way to enrich, as well as the possibility of
using crypto-assets on the territory of the Republic of Uzbekistan as a means of payment
or payment acceptance;
–
prohibition to carry out operations with anonymous crypto-assets;
–
provision of information free of charge at the request of the authorized div
related to the implementation of the activities of the platform;
–
other requirements in accordance with legislative acts.
Additional licensing requirements and conditions for crypto exchanges are:
–
implementation of quotations for crypto-assets based on the ratio of supply and
demand for them;
–
the presence of formed charter capital in the amount of at least five thousand
basic estimated units in the form of funds as of the date of application, of which three
thousand are reserved on a separate account in a commercial bank of the Republic of
Uzbekistan [6].
One interesting point is that
offshore companies
cannot be shareholders of
service providers.
According to the Resolution the Agency adopted a number of provisions regulating
this sphere:
–
Regulation on the procedure for licensing activities of service providers in the field
of crypto-
asset circulation (registered by the Ministry of Justice on 15/08/2022 №3380);
–
Rules for trading crypto-assets on the crypto-exchange (registered by the
Ministry of Justice on 15/08/2022, №3379);
–
Regulation on the procedure for determining the amount of fees, their payment,
and distribution for carrying out activities in the field of crypto-asset circulation
(registered by the Ministry of Justice on 28/09/2022, N3388);
–
Rules for the implementation of crypto-shop activities (registered by the
Ministry of Justice on 31/10/2022, №3395);
–
Regulation on the procedure for issuance, registration of issuance and circulation
of crypto-assets by residents of the Republic of Uzbekistan (registered by the Ministry of
Justice on 28/11/2022, №3397);
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–
Regulation on the procedure for registration of participants in the special regime
of regulation in the sphere of crypto-asset circulation (the special regime of
“
Regulatory
Sandbox
”) (registered by the Ministry of Justice on 30/12/2022, №3409)
[7].
Recently, the government decided to curb the activity of online cryptotraders and
introduced a new regulation regarding sale and purchase of cryptocurrencies for the
residents of Uzbekistan. According to President’s Resolution No. RP
-3832, from January
1, 2023, citizens and legal entities of the Republic of Uzbekistan can carry out
transactions for the purchase, sale, and (or) exchange of crypto-assets
exclusively
through national service providers
in the manner prescribed by legislative acts [8].
III. Taxation
In accordance with the Resolution of the President of the Republic of Uzbekistan
dated July 3, 2018, No. RP-3832, operations of legal entities and individuals related to the
turnover of crypto-assets, including those carried out by non-residents, are not subject to
taxation, and the income received from these operations is not included in the taxable
base for taxes and other obligatory payments.
Now it would be best to classify activities related to crypto-assets according to
their relation to business activity.
The purchase and sale of crypto-assets by individuals are not considered business
activity. But other types of activities (mining, crypto-shop, crypto-exchange, and crypto-
depository) require an established legal entity which is expected to be a business activity.
IV. Conclusion
According to PwC, for traditional financial institutions, digital assets regulation
gives the long-needed clarity and certainty to enter the space and start building their
digital assets offerings. For crypto-native firms, regulatory clarity may mean having to
quickly expand their regulatory expertise and compliance oversight, in line with global
financial services regulatory requirements [9].
Overall, we can conclude that Uzbekistan has adopted legislation that regulates
mostly the organizational aspects of crypto-assets. This sphere is not developed yet,
that’s why we cannot discuss further aspects o
f regulations, such as crypto-assets as
securities or another financial instrument, where the boundary for making this difference
is. The government is making efforts to regulate this sphere, but regulation is not liberal,
there is not much offer and demand in the market. Given this situation, this sphere will
not get enough incentives to develop.
REFERENCES:
1.
Trautman, Lawrence J., Is Disruptive Blockchain Technology the Future of
Financial Services? (May 28, 2016). 69 The Consumer Finance Law Quarterly Report 232
(2016), Available at SSRN: https://ssrn.com/abstract=2786186
2.
Hileman, Garrick, The Bitcoin Market Potential Index (August 3, 2014). Available at
SSRN: https://ssrn.com/abstract=2752757 or http://dx.doi.org/10.2139/ssrn.2752757
3.
Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31
May
2023
on
markets
in
crypto-assets,
https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=celex:32023R1114
4.
https://napp.uz/en/pages/malumot
5.
There are four legal entities providing crypto-shops licensed by the Agency. You
can find the other service providers at https://napp.uz/uz/pages/erlsp
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6.
1 Basic estimated unit = 330,000 soums (as 1 May 2023).
7.
All these documents can be found on www.lex.uz official gazette of legislation by
the registration number.
8.
Nowadays, only one crypto-exchange exists at www.uznex.com platform.
9.
https://www.pwc.com/gx/en/about/new-ventures/global-crypto-regulation-
report-2023.html
