Uzbekistan is establishing a regulated crypto mining area known as Besqala Mining Valley in Karakalpakstan. This initiative comes from a recent decree by President Shavkat Mirziyoyev, which allows tax exemptions on mining income until January 1, 2035. The primary goal is to draw in investments, increase the use of renewable energy, and enhance job opportunities through carefully managed mining operations.
Mining activities will be restricted to legal entities, focusing on renewable energy sources, especially solar power. Other regulated energy systems may also be considered under specific provisions. The oversight for licensing and supervision will be conducted by a state-backed authority, while a national agency will manage operational approvals. Companies will be permitted not only to mine but also to trade and convert cryptocurrency assets, provided they process all revenues through domestic banking channels.
Despite the tax advantages, miners in the zone are required to pay a monthly fee based on their revenues, as well as higher electricity rates when using the national grid. Stringent regulations will be in place to curtail illegal activities, including mandatory background checks for companies and their owners, along with compliance with financial transparency regulations.
What changed in Uzbekistan’s approach to cryptocurrency? Uzbekistan has been gradually developing its crypto regulatory landscape. Initially, a 2018 presidential decree acknowledged digital assets, albeit under a restrictive framework. During this time, mining was primarily allowed for approved entities using solar power, reflecting a cautious regulatory stance.
The country observed its neighbor Kazakhstan's experience, where unregistered miners faced repercussions, leading to significant issues with grid stability. In response, Uzbekistan initially enforced a deterrent strategy requiring miners connected to the grid to pay twice the standard electricity rate. Recently, however, the regulatory approach has evolved. The introduction of a 15% electricity discount for registered miners, together with the establishment of the Besqala Mining Valley, signifies a shift towards embracing legitimate crypto mining activities.