Uzbekistan opens up to crypto mining, but the government places some restrictions

Uzbekistan said it will allow companies to mine digital assets as long as they use solar energy for mining operations. The regulatory act published on the government website, dated June 24, describes the confirmation of the "Guidelines on the registration of cryptocurrency mining". The regulatory act also sets the finalization date of the guidelines at 9 July. Another article in the document offers uncompromising wording. We read that:

The mining activity is carried out exclusively by the legal entity with the use of electricity, supplied by a photovoltaic solar power plant.

As a further implication, the miners must own the photovoltaic solar power plant that will provide the energy for their mining operations. Likewise, the executive order requires the mining operator to obtain a certificate and register as part of Uzbekistan's National Registry of Cryptocurrency Mining Companies.

The procedure requires a list of some documents. However, it should not take more than 20 days from submitting the application to the final decision of the licensing body. After the registration process, the certificate remains valid for one year.

Tax benefits for cryptocurrency miners

The government of Uzbekistan has announced major tax breaks for miners who run their crypto mining operations with solar energy. The cryptocurrencies generated by these mining activities will not be taxed, as will the earnings that are obtained through platforms such as Bitcoin Pro. The country will exempt all domestic and foreign countries from income tax.

However, mining companies will still have to pay special tariffs on the energy consumed set by the government of Uzbekistan. The government will also ban the mining of anonymous cryptocurrencies. While the government hasn't been clear about it, it could be private cryptocurrencies like Monero (XMR).

Uzbekistan embraced the cryptocurrency market as early as 2018, legalizing trading only through a local exchange. Therefore, the trading of the mined assets will only take place through the cryptocurrency trading platforms registered in Uzbekistan.

In April 2022, the restructured NAPP became Uzbekistan's primary regulator for cryptocurrencies. He is responsible for creating a special regulatory regime in the country. Uzbekistan President Shavkat Mirziyoyev has launched a series of initiatives to introduce a regulatory framework for cryptocurrencies in the country.

The extreme electrical power required for crypto-mining operations has been a major concern of the countries. For this reason, China announced a total ban on Bitcoin mining last year. Later Kazakhstan also cracked down on mining operations that put a strain on the country's electricity grid. After China's ban, Kazakhstan emerged as the second largest cryptocurrency mining country after the United States.