Many of you have probably heard that Uzbekistan is considered as a hospitable and sunny country. However, not many people know about the ongoing large-scale socio-economic reforms over the past few years, led by
the President Shavkat Mirziyoyev. In a very short period, the country was able to assert itself in the international market by establishing strong trade and economic relations with many other countries.
Not in vain, The Economist newspaper chose Uzbekistan as the country of the year in 2019.
As in many other industries, in the field of "blockchain" technology and crypto-assets turnover the country applies modern approaches for their development and regulation.
In 2018, the country shaped a clear-cut course towards the development of the digital economy. Priority directions for the development of "blockchain" technology were identified, in particular, for the introduction of "blockchain" technology in public administration. The National Agency for Project Management under the President of the Republic of Uzbekistan (hereinafter referred to as the Agency) was appointed as an authorized body for the digital economy development and licensing of activities in the sphere of turnover of crypto-assets.
Later, the Fund for Support of Digital Economy Development “Digital Trust” was established under this Agency, in order to attract and consolidate investors' funds for the implementation of projects in the field of digital economy development on the terms of public-private partnership, including those related to the introduction of "blockchain" technologies, implementation of promising projects in this regard and support for innovative start-up projects.
The country has defined the procedure for licensing crypto-exchange activities and established rules for crypto-exchange trading. The license is issued exclusively to foreign entities that meet the licensing requirements, while the main attention is paid to compliance with measures to combat money laundering and the financing of terrorism, as well as to protect the rights and legitimate interests of citizens and prevent the use of fraud schemes.
It should be noted that the Uzbek authorities have chosen a very cautious approach, for this reason for now residents of the Republic of Uzbekistan are only allowed to sell crypto-assets on crypto exchanges. This means that the crypto exchanges can focus mainly on the foreign market.
In December 2019, the Korean company "Kobea Group" obtained a license to open a crypto exchange and launched the exchange www.uznex.com.
At this date, it is the first licensed crypto exchange not only in Uzbekistan, but also overall in the Central Asian region.
At a time when many countries are puzzling on crypto-assets taxation, Uzbekistan has decided to exempt crypto turnover from taxation, which seems to be a fairly reasonable decision at this stage, especially for attracting foreign companies to the country and investments, and taking into account the need to develop methodological approaches to the legal regulation of the crypto-assets turnover.
In January, 2020, a draft decision of the head of state on the creation of
a "Regulatory sandbox" for the development of digital technologies "Uzbekistan Blockchain Valley" affiliated with the Agency was placed for public discussion in order to test and implement pilot projects in the field of implementation of "blockchain" technology, turnover of crypto-assets and other innovative digital technologies.
It is assumed that the sandbox will provide a special legal regime to regulate innovative projects in the sphere crypto-assets turnover for a limited number of users.
At the end of the project implementation period, which may be from 1 to 3 years, the project is put in the public domain, with the introduction of approved standards in the territory of the country, or, in case of inefficiency, the project is subject to be closed. To become a member of the sandbox, the company must be
a resident of the Republic of Uzbekistan, meanwhile foreign companies can participate by registering a company or representative office within the country.
In the absence of unified approaches to legal regulation of the turnover of crypto-assets, the creation of a Regulatory sandbox is recognized as the most optimal solution, which provides an opportunity to develop and test new technologies in
a controlled environment and minimize the risks. On the one hand, implementing projects in the sandbox reduces costs and project launch time for technology companies, on the other hand, it helps government agencies to understand these technologies and find the best ways to regulate them by creating a controlled project implementation environment.
In addition, the Uzbek authorities are planning to create a National Mining Pool "Uzbekistan Cryptocurrency Mining Pool" for pooling miner resources engaged in crypto-asset mining over the country for both residents and non-residents of the Republic of Uzbekistan. Private miners are supposed to be registered, and the activities of industrial miners (miners using more than 100 kW/h of electricity) are subject to licensing. Participation in the mining pool will become mandatory for license holders and registered miners. Licensing and registration will be carried out by the authorized body.
For a long time, Uzbekistan has been one of the leaders in low-cost mining, due to the relatively low cost of electricity. However, this general picture changed remarkably in 2019, when a decision on three-fold increase in electricity tariffs from March 2020 for those engaged in crypto-assets turnover was made by the Ministry of energy of the Republic of Uzbekistan. Hence, this decision attracted considerable criticism from the community of miners.
The members of the National Mining Pool are proposed to benefit from the standard electricity tariffs, while the increased tariffs are supposed only for miners who carry out activities outside the law, without registration or obtaining a license.
According to the regulator, the creation of the National Mining Pool will contribute to the formation of a favorable environment for mining, attracting foreign investments to the country, developing the activities of companies in this area and legalizing their activities.
To enact the activities in the sphere of turnover of crypto-assets in the country’s legal framework, the issue of defining new types of economic activities, such as "carrying out activities of crypto exchanges", "private mining", "industrial mining", "service provider in the sphere of turnover of crypto-assets", was raised. The Agency also plans to establish a dialogue with the European Union Working Group on Standards, to make appropriate changes to the international standard for the statistical classification of economic activities («Statistical classification of economic activities in the European Community», NACE Rev.2).
In addition to reforms in the field of blockchain technology and crypto-assets turnover, the country is actively developing the digital economy as a whole.
In particular, in November 2019, the Prime Minister of the country launched the project "One million programmers", implemented jointly with the government of the UAE, Dubai Future Foundation and Udacity Project. The project provides remote training of the general population in programming through a special portal www.uzbekcoders.uz aimed at training 1 million young professionals in digital technologies. The project is judged to be relevant and appropriate in the context of Uzbekistan, because more than 60% of the country's population is under the age of 30, and the average age of the population in the country does not exceed 29 years.
On January 24, 2020, the President of the Republic of Uzbekistan Shavkat Mirziyoyev in his Address to the new Parliament, declared 2020 as the "Year of Science, Enlightenment and the Digital Economy Development".
For this purpose, the development of the program "Digital Uzbekistan 2030" is planned, and for its coordination, such positions as the Deputy Prime Minister for digital development, deputy heads of ministries and departments, local khokims (mayors) will be introduced. In addition to the main IT Park in Tashkent, it is planned to create complementary IT parks in 6 more regions of the country.
Taking into account all the above facts, it can now be safely assumed that Uzbekistan is a rather promising country and a potentially new market for implementing digital projects, including in the sphere of crypto-asset turnover.