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Regulation of crypto-assets turnover in Uzbekistan

Regulation of crypto-assets turnover in Uzbekistan


  Adoption of theResolution of the President of the Republic of Uzbekistan№PR3832 “On measures on the development of digital economy of the Republic of Uzbekistan” on July 3, 2018 determined indroduction and development of the activities in the field of crypto-assets turnover, including mining, smart contracts, consulting, issuance, exchange, storage, distribution, management, insurance, crowdfunding, as well as blockchain technologies to diversify various forms of investment and entrepreneurial activities as one of the prior objectives for the digital economy development. 
  The Resolution has outlined the following basic aspects:
- transactions of legal entities and individuals related to the crypto-assets turnover, including those implemented by non-residents, are not subject to taxation, as well as the income gained from these transactions is not included in the taxable base for taxes and other compulsory payments;
- currency transactions related to the crypto-assets turnover implemented by the people who have obtained the license to carry out activities in the field of the crypto-assets turnover according to the established procedure, are not subject to the legal provisions on currency regulation;
- the procedure, in compliance with which activities in the field of the crypto-assets turnover, including creation of crypto-exchanges for trading crypto-assets, are subject to licensing, becomes effective since October 1, 2018;
- National Agency for Project Management under the President of the Republic of Uzbekistan has been assigned as the authorized body in the field of implementation and development of the digital economy, as well as the licensing body for activities in the field of crypto-assets turnover.

       The Resolution of the President №PR-3926 “On measures to organize the business of the crypto-exchanges in the Republic of Uzbekistan” was adopted on September 2, 2018 and set forth the following basic points:

- an entity that provides an electronic platform for exchange, purchase and sale of crypto- assets is considered to be a crypto-exchange;
- a crypto-asset represents a set of records in the blockchain that has a certain value and an owner;
- turnover activities of crypto-assets and crypto-exchanges are not subject to the legislation on securities, exchanges and exchange business;
- a license to operate crypto-exchanges is issued principally to foreign legal entities through opening subsidiaries or other enterprises within the territory of the Republic of Uzbekistan;
- to perform industrial mining (use over 100 kW/h), land plots are provided without an electronic auction in specially-designated territories determined by “Uzbekenergo” JSC and “Uzbekhydroenergo” JSC as agred with the National Agency for Project Management under the President of the Republic of Uzbekistan, chairman of the Council of Ministers of the Republic of Karakalpakstan, khokims of the regions and Tashkent city accordingly;
 - crypto-exchanges are provided with the right to receive remuneration for the services rendered, including crypto-assets, to establish its amount and the procedure for collecting from bid participants (customers), to arrange exchange transactions with residents and non-residents of the Republic of Uzbekistan aimed at acquiring and (or) disposing crypto-assets for national and foreign currency, as well as the exchange of crypto-assets into other crypto-assets;
- the amount and the procedure for paying the state duty for issuing a license for the crypto-exchange business are determined by the National Agency for Project Management.

  On January 22, 2019 the National Agency for Project Management adopted the Regulation “On the procedure for licensing the business of crypto-exchanges” which has outlined the following basic aspects:
-  a license to implement the crypto-exchange business is issued principally to foreign legal entities through opening subsidiaries or other enterprises within the territory of the Republic of Uzbekistan; 
- a subsidiary or other enterprise of a foreign legal entity is doing its business in reliance upon a license issued to a foreign legal entity;
- legal entities - residents of the Republic of Uzbekistan are not allowed to participate in the authorized capital (funds) of subsidiaries or other enterprises of foreign legal entities which have relevant licenses;
-  a lisence is issued for the indefinite term;
-  a lisence transfer to another legal entity is prohibited;
- the authorized fund of the crypto-exchange is generated solely from the funds of its founders. The use of funds obtained as credit, under collateral and other borrowings is not allowed for generating the authorized fund of the crypto-exchange.

In addition, the Regulation has established the following licensing requirements and conditions for the business of crypto-exchanges:  
- availability of the authorized fund in the amount of at least thirty thousand minimum wages in the form of cash at the date of submitting an application and twenty thousand out of this amount are reserved on a separate account with a commercial bank of the Republic of Uzbekistan;
- availability of operating electronic crypto-exchange trading system hosted on servers located within the territory of the Republic of Uzbekistan and meeting the requirements stipulated in this Regulation;
- availability of crypto-exchange trading rules which necessarily stipulate:
the procedure for admitting participants to crypto-exchange trading;
-measures aimed at ensuring compliance with the requirements of legislation on combating money laundering and financing of terrorism;
-the procedures for admitting crypto-assets to turnover and their withdrawal from the turnover;
-the procedure for implementing and registrating tranactions with crypto-assets;
-the procedure for mutual settlements of participants in crypto-exchange trading when concluding transactions;
-the fee amount for using crypto-exchange services and the procedure for determining thereto;
-measures to prevent the prices manipulation on the crypto-exchange and the confidential information misuse;
-a prohibition against the crypto-assets use for illegal purposes;
- making quotation of crypto-assets in reliance upon the supply and demand ratio thereto;
- storage of information on the customers’ transactions with crypto-assets, as well as their identification data and materials on customer relations, including business correspondence within 5-year period;
- compliance with the legislation of the Republic of Uzbekistan in the field of crypto-assets turnover;
- at the request of the licensing authority submitting the information related to the crypto-exchange business.

    Until 2018 the legislation of Uzbekistan has not regulated activities related to the crypto-assets turnover. The statutory acts specified in this article do not provide reasonable responses to all questions due to, in particular, unavailability of the “Crypto-assets turnover” definition itself, while the Legislation contains requirements for licensing such activities, and regulates the procedure for obtaining licenses only for crypto-exchange business. Thus, persons dealing with the business related to crypto-assets, but not intending to create a crypto-exchange, are potentially subject to risk since the legislation establishes administrative and criminal liability for doing this business without a relevant license. However, even upon availability of many controversial issues, the willpower of a lawmaker is obvious in settling the issue considered in this article. This fact enables to assume that in the nearest future all the issues related to the crypto-assets turnover in Uzbekistan will be adequately regulated.

 

 

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