In many countries, the problem of blockchain technologies and crypto assets regulation remains unresolved. Some countries are taking a soft regulation approach by issuing explanatory letters to the relevant authorities on the regulation of cryptocurrencies and tokens. In fact, such regulation is aimed at forming the most effective model of accounting and control of cryptocurrency transactions allowing effective taxation and combating money laundering. For example, in the United States, according to the official position of the SEC (the Securities and Exchange Commission of the United States), some types of tokens will be securities and, accordingly, will be subject to securities legislation with all its consequences. The lack of a unified approach in the field of blockchain technologies and crypto assets regulation puts in a difficult position business representatives associated with ICO, cryptocurrency exchanges, and blockchain technologies. It is worth noting that in Uzbekistan, as in many other countries, there is a program on the development of the digital economy. The later one aims at introducing blockchain technologies in 2021 in the activities of state bodies and state registers. The objectives of the program also include the development of activities in the field of cryptocurrency transactions, the use of smart contracts, mining, crowdfunding. On September 2, 2018, in pursuance of this program, the President of the Republic of Uzbekistan adopted a Resolution on measures to organize the activities of crypto-exchanges in Uzbekistan. The main points of the Resolution, which are worth paying attention to, are:
Turnover of crypto assets, including those involving non-residents, is not subject to taxation and is not subject to tax, that is, neither VAT nor income tax;
If a person has received a license for the turnover of crypto assets (a license for the activity of crypto-exchanges is required), then such crypto assets are not subject to the legislation on currency regulation. A special license is issued by the National Agency for project management (NAPA) under the President of Uzbekistan;
The activity on turnover of crypto assets and crypto-exchanges is not covered by the legislation on securities, exchanges and exchange activities;
Land for industrial mining is provided without an auction. Specific land for mining is provided in special areas determined by JSC "Uzbekenergo" and JSC "Uzbekgidroenergo" in coordination with the National Agency of project management (NAPU) under the President of Uzbekistan;
The license to operate crypto-exchange is issued exclusively to foreign legal entities.
In addition, a definition has been given of such concepts as:
Crypto-exchange – an organization that provides an electronic platform for the exchange, purchase, and sale of crypto-assets;
Crypto asset – a set of records in the blockchain that has value and owner.
Thus, the legislation repeals the taxation of cryptocurrency transactions; removes activities on turnover of crypto assets and crypto-exchanges from the legislation on securities, exchanges and exchange activities. However, under the currency regulation legislation, the turnover of crypto assets carried out only by persons who have received a license is deducted. It is interesting that such a license can only be obtained by foreign legal entities that have opened subsidiaries or other enterprises on the territory of the Republic of Uzbekistan.
At the same time, to obtain such a license, the crypto-exchange must:
Form the authorized capital not less than 30 thousand minimum wages (which is about 50 million rubles.);
Place an electronic system of crypto-exchange trading on servers in Uzbekistan;
To quote crypto assets based on supply and demand for them;
Establish the rules of the crypto-exchange activity prohibiting to conduct illegal cryptocurrency operations;
Store information about all transactions, including business correspondence, for 5 years.
The licensing authority is the National Agency of project management under the President of Uzbekistan.Thus, the favorable tax, currency regime, as well as the non-recognition of cryptocurrency assets as securities, the provision of land for industrial mining without auction, create an attractive environment for attracting business engaged in mining and crypto-exchange operations in Uzbekistan.
Translation by: Boryana Kiskinova