The world community is now focused on Uzbekistan, the country in the heart of Central Asia with a population of 34 million people, where, under the leadership of the President of the Republic of Uzbekistan Shavkat Mirziyoyev wide-ranging reforms are being conducted to accelerate the country's socio-economic development and improve the quality of life of the population. One of the priorities of the ongoing reforms is to increase investment attractiveness and attract foreign investment, creating the most favorable conditions for doing business.
Special attention is paid to the issues of digitalization of the activities of state bodies, ensuring digital transformation and implementing advanced information and communication technologies in all spheres. Uzbekistan strives to keep up with the times and in the near future become one of the leading countries in the field of creating a favorable environment for the introduction of innovative digital solutions.
And it should be emphasized that Uzbekistan has become one of the first countries, not only in the CIS, but also in the world, to regulate the use of blockchain technology and crypto-assets turnover in the framework of the digital economy development.
In 2018, the President adopted resolution No. PP-3832 “On measures to develop the digital economy in the Republic of Uzbekistan”
and No. PP-3926 “On measures to organize the activities of crypto exchanges in the Republic of Uzbekistan”, which provided the basis for the beginning of legal regulation of the crypto-assets turnover .
The National Agency for Project Management under the President of the Republic of Uzbekistan (NAPM) has been appointed as the authorized body for the development of the digital economy, and the implementation and development of activities in the field of crypto-assets turnover, including mining, smart contracts, while "blockchain" technologies have been identified as the most important tasks for the diversification of various forms of investment and business activities.
In addition, a bold step was made towards the exemption of operations and income of legal entities and individuals related to crypto-assets turnover, including those carried out by non-residents, from taxation.
The result was the first issuance in December 2019 in the Central Asian region of licenses to operate a crypto-exchange, the launch of which was formally announced in January 2020.
At the same time, Agency implements cautious and consistent approach in forming a regulatory environment for the crypto-assets turnover taking into account the high-priority need to ensure the protection of rights and legitimate interests of citizens, preventing the use of crypto-assets for various illegal purposes, including money laundering and financing of terrorism.
The lack of a unified regulatory approach at both the regional and international levels in the field of crypto-asset turnover, as well as the rapid pace of digital technology development, effectively exclude their effective legal regulation by applying existing approaches.
In this regard, in January, 2020, an initiative was launched to create
a Regulatory sandbox for the development of digital technologies "Uzbekistan Blockchain Valley" affiliated with Agency. The corresponding draft document was placed for public discussion.
This type of experimental sandbox provides special legal regimes for its participants to test digital technologies and develop methodological approaches for legal regulation, the same experimental sandbox has been already used in the UK, Singapore, Malaysia, the Netherlands and the Russian Federation.
The main goal of establishment of the Regulatory sandbox "Uzbekistan Blockchain Valley" is to create a single platform for testing and pilot implementation of projects in the field of crypto-asset turnover and blockchain technologies that is not regulated within the applicable legal system at the national level, the formation of new regulatory mechanisms and the implementation of testing of these regulatory mechanisms, reducing the time and cost of bringing innovative digital technologies to the country's market.
The main activities of residents of the Regulatory Sandbox are proposed to be:
development and implementation of blockchain technology;
provision of services for over-the-counter transactions with crypto-assets;
private and industrial mining;
activities on conversion of crypto-assets, provision of services of crypto-wallets;
implementation of the initial offer of crypto-assets (Security Token Offering);
activities in the area of crypto-asset turnover and blockchain technology.
To obtain the status of the Regulatory sandbox resident, companies must carry out one of the activities corresponding to the directions of the Regulatory sandbox, have their own and unique technologies (products, services) in the sphere of crypto-asset turnover or "blockchain" technologies offered for use and testing in a Regulatory sandbox, or to prove that an innovative approach is used in using well-known technologies.
They are also required to have a business plan with specific targets, risk assessment report and activity plan to mitigate them, action plan on suspension of works in connection with the project and written confirmation of potential clients about their participation in the project.
As in case of many sandboxes, it is supposed to provide a special legal regime for innovative projects in the sphere of crypto-asset turnover, including exemption from compliance with certain norms of applicable law when implementing pilot projects for a limited number of users.
The project implementation period is limited to 12 months, with the possibility of further extension but no more than for 24 months. After expiration of this limit or during this period, following the results of the analysis of the project, in case if they are considered to be effective the decision will be made about entering the approved norms in the normative legal acts of the Republic of Uzbekistan and extending the project beyond the Regulatory sandbox, otherwise – on termination of its further implementation.
In this regard, the Regulatory sandbox is considered as a platform and intermediate link for a smooth transition to a full-fledged crypto-assets turnover and development of effective mechanisms for regulating processes related to the crypto-assets turnover and introduction of "blockchain" technology.
It is important to emphasize that in the process of developing methodological approaches to regulate crypto-assets Agency pays special attention to issues of ensuring compliance of international standards for combating money laundering, financing of terrorism and financing of proliferation of weapons of mass destruction (FATF Recommendations).
According to experts, the intention to establish a Regulatory sandbox is another progressive step that reaffirms the commitment of the Uzbek government to actively introduce modern digital technologies for the development of the country's economy.