March 26, 2021
Crypto-assets in the Republic of Uzbekistan
- Resolution of the President of the Republic of Uzbekistan dated July 3, 2018 No. 3832 “On measures to develop the digital economy in the Republic of Uzbekistan” (hereinafter – “PP-3832“);
- Resolution of the President of the Republic of Uzbekistan dated September 2, 2018 No. 3926 “On measures to organize the activities of crypto-exchanges in the Republic of Uzbekistan” (hereinafter – “PP-3926“);
- Regulations on the procedure for licensing the activities of crypto-exchanges, approved by the Order of the Director of NAPM dated January 21, 2019 No. 16, registered by the Ministry of Justice of January 22, 2019 No. 3127 (hereinafter – “Regulations on the procedure for licensing the activities of crypto-exchanges“);
- Rules for crypto-exchange trading approved by the Order of the Director of NAPM dated January 21, 2019 No. 16, registered by the Ministry of Justice of January 22, 2019 No. 3127 (hereinafter – “Rules for crypto-exchange trading“)
Forming legal framework for digital economy
In the era of development of information technologies, digitalization of society, the question of regulating new objects and related relations arises. With the introduction of such objects as crypto-assets and tokens in civil circulation new relations between subjects began to emerge, which without regulation are creating or can create unexpected consequences in the future.
The Resolution of the President of the Republic of Uzbekistan dated July 03, 2018 No. 3832 “On measures to develop the digital economy in the Republic of Uzbekistan” was adopted to create a framework and regulate this rapidly-developing area. The Resolution outlined the most important tasks:
- implementation and development of activities in the field of crypto-assets’ turnover, including mining (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 cryptocurrencies), smart contracts (an agreement in electronic form, the exercise of rights and responsibilities for which is carried out by automatic execution of digital transactions), consulting, emission, exchange, storage, distribution, management, insurance, crowdfunding (collective financing), as well as blockchain technologies for diversifying various forms of investment and entrepreneurial activity;
- development of the necessary legal framework for the implementation of blockchain technologies, taking into account the best practices of foreign countries;
PP-3832 also set a couple of essential rules. Firstly, transactions 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 income received from these transactions is not included in the tax base for taxes and other mandatory payments. Secondly, currency transactions related to the turnover of crypto-assets carried out by persons who have received a license to carry out activities in the field of turnover of crypto-assets in the prescribed manner are not subject to the norms of the legislation on currency regulation.
Blockchain implementation in Uzbekistan
It is planned to introduce blockchain technology from January 1, 2021
- in the activities of state bodies, including when interacting with other state bodies and other organizations, the implementation of public procurement, the provision of public services, verification of personal information;
- when maintaining state registers, classifiers and other databases, including updating and using the information included in them;
- into the corporate governance system of large commercial organizations with a predominant state participation in the charter capital, including for improving business processes, optimizing production, administrative and operational processes, as well as introducing modern management and resource management;
- in clearing operations, when making payments, trade finance (letter of credit), as well as project lending.
Adoption of PP-3926 created a legal foundation for the operation of crypto-exchanges on the territory of Uzbekistan. According to PP-3926, a crypto exchange is an organization that provides an electronic platform for the exchange, purchase and sale of crypto-assets. PP-3926 established licensing requirements and conditions for the operation of crypto-exchanges.
Legal regulation of crypto-exchange trading
The Order of the Director of the National Project Management Agency dated January 21, 2019 No. 16, registered by the Ministry of Justice on January 22, 2019 No. 3127, which approved the Regulation on the procedure for licensing the activities of crypto exchanges and the Rules for crypto-exchange trading, put into legal frame the turnover of crypto-assets and tokens.
The rules for crypto-exchange trading gives definitions to the basic concepts used in crypto-exchange trading. According to the Rules for crypto-exchange trading:
- blockchain – a distributed data register in which all data is recorded sequentially and distributed in blocks, with each new block being connected to the previous block with a cryptographic signature;
- crypto asset – a set of records in the blockchain that has value and owner;
- crypto exchange – an organization that provides an electronic platform for the exchange, purchase and sale of crypto-assets and tokens;
- token – a unit of account designed to represent a digital balance, performing the function of a “substitute for securities” in the digital world, representing an entry in a register, distributed in the blockchain. The token is issued by a legal entity or individual entrepreneur (issuer) with the aim of attracting investments and financing of activities;
- stablecoin – a crypto-asset, the value of which is tied to the asset of a legal entity.
After the adoption of the Order, on January 20, 2021, the first crypto-exchange in Uzbekistan, UzNEX, began its work.
However, it should be taken into account that due to the fact that this field is at the initial stage of development in Uzbekistan, the concepts of “crypto-asset” and “token” under the legislation of Uzbekistan may have a definition and scope different from similar concepts specified in the legislation of other jurisdictions.
Moreover, residents of the Republic of Uzbekistan have the right to conclude transactions exclusively for the sale of crypto-assets and tokens on crypto-exchanges. Consequently, residents of the Republic of Uzbekistan cannot purchase crypto-assets or tokens. We can derive from abovementioned that only non-residents can fully carry out trade activities with crypto-assets and tokens on the territory of the Republic of Uzbekistan.