Recent legal moves in Uzbek Crypto arena
The government of Uzbekistan has taken a very careful approach concerning the regulation of crypto assets. Until November 23, 2021, Citizens of Uzbekistan could only sell their virtual assets, but thanks to recent regulatory updates, Individuals can now freely buy and sell their digital assets in specialised crypto exchanges.
What are the key legal changes?
Crypto asset trading
In accordance with the order by The National Agency of Project Management, (hereinafter:- “NAPM”) which came into force from November 23, 2021, residents of Uzbekistan can now freely trade crypto assets with other residents of Uzbekistan in national currency (uzbek soums), while they can only sell their crypto assets to non-residents in foreign currency.
The order also allowed issuance of security tokens by legal entities and individual entrepreneurs who passed relevant registration for the purposes of attracting investment and financing their activities.
All the tokens offered for trade in Uzbek Crypto exchange platforms must be backed by physical or other material property. While crypto exchanges are liable for checking the organisation who placed tokens for the presence of property security. Moreover, at least 10% of the amount planned to be attracted as part of offered tokens must be deposited on a special account of the crypto-exchange.
Correspondingly, the order from the NAPM also amends the regulation on the licensing procedure for cryptocurrency exchanges, which was initially adopted back in January 2019. Accordingly, strict procedures for licensing crypto-exchanges in Uzbekistan have been established.
Only foreign companies can open crypto exchanges by opening subsidiaries are eligible for obtaining the license on condition that the following specific requirements are met:
- presence of a statutory fund in the amount of at least 30,000 minimum wages (EUR 2,019), out of which 20,000 (EUR 1,346) should be reserved in one of commercial banks of Uzbekistan;
- placement of a functioning electronic system of crypto-exchange trades on the servers located within the territory of Uzbekistan;
- availability of rules for crypto-exchange trading (procedure for admitting to trading, the size of the fee, registration of transactions, etc.);
- storage of information on transactions, identification data, business correspondence for 5 years.
The license is issued for an indefinite period. In cases of violation of the rules and requirements, the license might be suspended or even canceled.
It is worth highlighting that local companies cannot even be co-founders for the crypto exchange business (have a share in the authorized capital of foreign companies or their subsidiaries). So far, UzNEX (launched in January 2020) is the first and the only licensed crypto exchange in Uzbekistan and in Central Asia.
Until recent regulatory changes, citizens of Uzbekistan were prohibited to buy Cryptocurrencies and other virtual assets.. But legalizing crypto trading and abolishing criminal liability has been a serious step to improve the actual state of affairs in the industry. NAPM has a quite optimistic attitude towards the cryptoexchange platforms, as these businesses not only introduce innovative IT solutions, but attract more foreign direct investment into the economy.