The Legislative Landscape of Cryptocurrency in Uzbekistan Prior to 2023

Early Initiatives and Regulations

In Uzbekistan, the government took initial steps towards regulating cryptocurrencies with several presidential decrees. A key decree, signed in February 2018, aimed to establish a legal framework for electronic money, including cryptocurrencies. This was followed by a decree in July 2018, focusing on the development of the digital economy, which explicitly stated that currency regulation norms do not apply to transactions involving cryptocurrency turnover. These decrees indicated a move towards a more structured regulatory environment for cryptocurrencies​​.

Central Bank’s Stance and Anti-Money Laundering Concerns

Despite these developments, the Central Bank of Uzbekistan maintained a cautious stance on cryptocurrencies. In September 2017, the Bank expressed concerns about the risks of cryptocurrencies, particularly in relation to terrorist financing and other criminal activities. This led to a cautious approach towards the adoption and regulation of digital currencies, with an emphasis on ensuring robust internal controls for organizations engaged in transactions with cryptocurrencies​​.

Licensing and Operation of Crypto Exchanges

In early 2020, Uzbekistan opened a crypto exchange where all crypto-assets must be licensed. However, the exchange limited its activities to selling previously acquired crypto assets to foreign users, prohibiting the purchase of crypto-assets. This restriction was attributed to the low financial literacy of the population. Additionally, increased tariffs were introduced for miners, indicating a regulatory focus on the mining sector, although a comprehensive procedure for applying these tariffs was still under development​​.

Criminalization of Unauthorized Trading

Trading in cryptocurrencies without proper licensing was recognized as a criminal offense under Uzbekistan’s Criminal Code. Individuals engaged in unlicensed cryptocurrency trading were subject to prosecution under laws pertaining to illegal foreign currency transactions and unlicensed activities. This strict legal position underscored the government’s intent to regulate the field tightly and prevent unregulated trading activities​​.

Draft Resolution and Future Prospects

A draft resolution discussed in Uzbekistan proposed allowing the registration, issuance, and conversion of tokens by residents and non-residents, indicating a potential shift towards more liberalized trading of crypto assets. This draft suggested that residents could engage in all types of crypto-exchange trades, although the risks associated with such trades were to be borne by the buyers themselves​​.

Conclusion

Prior to 2023, Uzbekistan’s approach to cryptocurrency regulation was characterized by an evolving and cautious stance. While the government took steps to integrate cryptocurrencies into the digital economy, concerns about money laundering and financial crimes led to strict regulations and criminalization of unauthorized trading. The development of a legal framework and discussions around more open trading practices indicated an ongoing effort to balance innovation with regulatory control in the digital currency sector.