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IS IT LEGAL TO ENGAGE IN CRYPTOCURRENCY AND HOW TO CREATE A
CRYPTO EXCHANGE IN UZBEKISTAN
The capital that rotates in the cryptocurrency is estimated at
billions of dollars. Each country has separate legal base that make
it unprofitable to invest in cryptocurrencies. Uzbekistan was not
an exception. However, the country has changed its opinion in the
long run. Recently several acts have been signed in order to
support the development of cryptocurrency activities.
To create a framework and regulate this rapidly developing
sphere, the President of Uzbekistan has signed the
Decree of the President No. 3832 “On measures for
the development of the digital economy in the Republic of
Uzbekistan” dated 03.07.2018.
The Decree outlined the most important tasks:
- introduction and development of activities in the field of
crypto-asset turnover, including mining (activities to maintain a
distribution platform and create new blocks with the ability to
receive remuneration in the format of new units and commission fees
in various cryptocurrencies), smart contracts (an electronic
contract, the fulfillment of rights and obligations under which is
carried out by performing digital transactions automatically),
consulting, issue, exchange, storage, distribution, management,
insurance, crowd-funding (collective financing), as well as
blockchain technologies for the diversification of various forms of
investment and entrepreneurial activity; - creation of the necessary legal framework for the introduction
of blockchain technologies, taking into account the best practices
of foreign countries.
Important mechanisms to facilitate cryptocurrency transactions
have also been identified as:
- 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 the income received
from these transactions is not included in the tax base for taxes
and other mandatory payments; - Currency transactions related to the turnover of crypto-assets
conducted by persons who have received a license to carry out
activities in the field of turnover of crypto assets by the
established procedure are not subject to the norms of the
legislation on currency regulation.
After that, the Decree No.3832, the Decree No.3926
“On the organisation of the activities of
crypto-exchanges” dated 02.09.2018 was
later signed.
The Decree defined the main directions:
- a crypto exchange is an organisation that provides an
electronic platform for the exchange, purchase, and sale of crypto
assets; - a crypto asset is a set of records in the blockchain that has a
value and an owner; - the activities related to the turnover of crypto-assets and
crypto exchanges are not subject to the legislation on securities
and exchange activities; - a license to operate crypto-exchanges is issued exclusively to
foreign legal entities by opening subsidiaries or other enterprises
on the territory of the Republic of Uzbekistan; - for the implementation of industrial mining (the use of more
than 100 kW/h), land plots are provided without an electronic
auction.
The activities carried out by the crypto exchange are
subject to licensing.
To obtain a license, it is necessary:
a) to have a formed authorised fund in the amount of at least
30,000 basic calculated amount in the form of funds as of the date
of application submission (about 761,000 USD), of which 12,000
(about 305,000 USD) are reserved in a separate account with a
commercial bank of the Republic of Uzbekistan;
b) the presence of a functioning electronic system of
crypto-exchange trading hosted on servers located on the territory
of Uzbekistan, and meets the requirements provided for in
the Regulation on the procedure for licensing the
activities of crypto-exchanges;
c) the existence of rules for crypto-exchange trading, which
must necessarily reflect:
- the procedure for admission to crypto-exchange trading of
participants; - measures aimed at ensuring compliance with the requirements of
the legislation on countering the legalization of proceeds from
criminal activities, the financing of terrorism, and the financing
of the proliferation of weapons of mass destruction; - procedures for admission to circulation and exclusion from the
circulation of crypto assets; - procedure for the implementation and registration of
transactions with crypto assets; - the procedure for mutual settlements of participants in
crypto-exchange trading when concluding transactions; - the amount of the fee for using the services of the crypto
exchange and the procedure for determining it; - measures to prevent price manipulation on the crypto exchange
and the misuse of confidential information; - prohibition on the use of crypto assets for illegal
purposes;
d) the implementation of quotations for crypto assets based on
the ratio of supply and demand for them;
e) storage for 5 years of information about transactions with
clients’ crypto assets, as well as their identification data
and materials on customer relations, including business
correspondence.
Crypto-exchanges were granted the right to:
- receive remuneration for the services provided, including
crypto assets, set its amount and the procedure for charging
trading participants (clients); - organise exchange transactions with residents and non-residents
of the Republic of Uzbekistan aimed at the acquisition and (or)
alienation of crypto assets for national and foreign currency, as
well as the exchange of crypto assets for other crypto assets.
The turnover of crypto assets and tokens was regulated with the
adoption of Order No.16 of the Director of the National
Agency for Project Management dated 21.01.2019, No.
3127, which approved the Regulation on the procedure
for licensing the activities of crypto exchanges and the rules for
conducting crypto-exchange trading.
The rules for the implementation of crypto-exchange trading gave
definitions to the main concepts used in crypto-exchange
trading:
blockchain is a distributed data registry in
which all data is written sequentially and distributed in blocks,
while each new block is connected to the previous block by a
cryptographic signature;
a crypto asset is a set of records in the
blockchain that has a value and an owner;
a crypto exchange is an organization that
provides an electronic platform for the exchange, purchase, and
sale of crypto assets and tokens;
a token is a unit of accounting designed to
represent a digital balance sheet, performing the function of a
“substitute for securities” in the digital world,
representing an entry in the register distributed in the
blockchain. The token is issued by a legal entity or an individual
entrepreneur (issuer) to attract investment and financing to the
activity;
a stablecoin is a crypto asset whose value is
tied to the asset of a legal entity.
Under the Rules of crypto-exchange trading, residents of
Uzbekistan cannot buy digital currency. They are only allowed to
sell crypto assets and tokens. This restriction does not apply to
citizens of other countries. They have the right to buy and sell
crypto assets, subject to their mandatory identification and the
conclusion of official contracts with them.
Any anonymous transactions with cryptocurrency are prohibited in
Uzbekistan. Also, crypto-assets cannot be used as a means of
payment on the territory of Uzbekistan. The authorised body
regulating transactions with cryptocurrency is the National
Agency for Project Management under the President of Uzbekistan
(NAPU).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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