July 2, 2024
Crypto-assets in the Republic of Uzbekistan
With the development of information technologies and digitalization of society, there is a need to regulate new objects and related relations. The introduction of such objects as cryptocurrencies and tokens into civil turnover has given rise to relations that, without appropriate regulation, may lead to unpredictable consequences. This topic becomes especially relevant in modern conditions, when digital assets play an increasingly significant role in the economy and social sphere.
Content:
1. Forming legal framework for digital economy;
2. Blockchain implementation in Uzbekistan;
3. Legal regulation of crypto-exchange trading.
Regulation:
- 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“);
1. 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.
2. 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.
3. Legal regulation of crypto-exchange trading
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.
The Director of the National Agency for Prospective Projects of the Republic of Uzbekistan adopted the Order dated 08/15/2022 Reg. number 3379 “On approval of the rules for trading crypto-assets on a crypto-exchange.”
According to these Rules, the organization of trading in crypto-assets is carried out by the crypto-exchange by providing clients with access to the electronic platform of the crypto-exchange for trading participants to perform actions aimed at buying, selling and (or) exchanging crypto-assets.
Access to the electronic platform of the crypto exchange is provided on the basis of an agreement.
The procedure for admitting a client to trading in crypto-assets, including other services (“spot”, “margin” trading, etc.) and crypto-exchange products, as well as exclusion from the number of participants in trading in crypto-assets, is determined by local regulations.
As defined in the Rules:
Clients are individuals and legal entities, including foreign individuals and legal entities, who enter into agreements with the crypto-exchange to carry out transactions with crypto-assets on the crypto-exchange.
To establish a relationship with a client, the crypto exchange requests:
For an individual – a copy of his identity document and personal identification number of an individual for citizens of the Republic of Uzbekistan;
For an individual entrepreneur – copies of his identity document and state registration certificate;
For a legal entity – a copy of the state registration certificate, information about the location, managers, as well as information specified in the constituent documents;
Other information provided by law, including in the field of combating the legalization of proceeds from crime, the financing of terrorism and the financing of the proliferation of weapons of mass destruction.
As a result of establishing a relationship between a crypto-exchange and its client, an account is created for the client in the electronic platform of the crypto-exchange, which contains information about the client, his funds, and crypto-assets held by the crypto-exchange.
Transactions on the direct trading platform are carried out in the following order:
A seller of crypto-assets in his personal account creates an application for the sale of crypto-assets indicating the requirements for the price of crypto-assets and the details of his account at the servicing commercial bank;
A crypto-exchange deposits the seller’s crypto-assets on the electronic direct trading platform until the transaction is completed or the seller’s request to return these crypto-assets;
A buyer accepts the application, sends funds in national or foreign currency to the specified bank account of the seller in the prescribed manner;
A buyer provides (attaches) a copy of the document on the transfer of funds in his personal account as evidence of the completed transfer;
A seller checks his account, makes sure that the funds have been received in full, and in his personal account allows the crypto exchange to send crypto assets to the buyer.
The crypto-exchange has the right to carry out transactions for the purchase and sale of crypto-assets on the direct trading platform on its own behalf and (or) at the expense of clients on the basis of an agency agreement by transferring funds through the crypto-exchange cash register.