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Uzbekistan’s Cryptocurrency Conundrum: Lack of Regulation Sparks Concerns

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A leading expert on international public and investment law has warned that Uzbekistan’s lack of regulation in the cryptocurrency sphere could lead to a range of threats, including misappropriation of criminal capital, tax evasion, terrorist financing, and the spread of fraudulent schemes.

“Cryptocurrencies are not regulated in Uzbekistan, which creates an environment where illegal activities can thrive,” said Jahongir Ubaydullayev. “It’s essential that the government establishes a single law to govern the sector and protect the rights of individuals involved.”

The Current State of Regulation

Uzbekistan has laws in place that regulate foreign exchange transactions, but they do not apply to cryptocurrency-related activities. This lack of regulation has led to confusion among investors and entrepreneurs, who are unsure whether trading cryptocurrencies is legal or illegal.

The Crypto-Exchange Limitations

The country’s crypto-exchange, launched in early 2020, only allows the sale of previously acquired crypto assets to foreign users, making it difficult for locals to buy cryptocurrencies. Miners in Uzbekistan have also been required to pay increased tariffs for electricity, but there is no procedure in place to identify and apply this tariff to mining consumers.

Legal Uncertainty

Trading in cryptocurrencies is considered a crime under Article 177 of the Criminal Code, but many experts argue that this law was not intended to cover cryptocurrency transactions. The lack of regulation has led to individuals being prosecuted under Article 190 of the Criminal Code for unlicensed activity.

Signs of Change?

However, there are signs that the government may be moving towards greater regulation. A draft resolution has been published on a discussion portal, which suggests that trading on crypto exchanges could be allowed in Uzbekistan. Under this proposal, citizens would be able to register, issue, and convert tokens issued by residents and non-residents of Uzbekistan.

Ongoing Concerns

Despite these developments, many remain concerned about the lack of regulation in the cryptocurrency sector. Until a single law is established to govern the industry, investors and entrepreneurs will continue to face uncertainty and risk.

Source: Shakhriyor Tojiboev, “The regulatory policy of cryptocurrencies in Uzbekistan”, Uzbekistan Law Blog, 12.07.2021.