A sandbox for cryptocurrency and blockchain projects will appear in Uzbekistan

The creation of a Regulatory sandbox for the development of digital technologies “Uzbekistan Blockchain” is being discussed in UzbekistanValley ”with the participation of the National Project Management Agency (NAPU).

This initiative is aimed at attractingforeign investment, creating favorable conditions for startups operating in the cryptocurrency industry, and regulating the circulation of digital assets. Priority tasks include the digitalization of government agencies through the implementation of blockchain and smart contracts.

Basics for the legal regulation of cryptocurrencies inIn Uzbekistan, the foundations were laid back in 2018, when the country’s President Shavkat Mirziyoyev signed the resolutions “On measures to develop the digital economy in the Republic of Uzbekistan” and “On measures to organize the activities of cryptocurrency exchanges in the Republic of Uzbekistan.”

Given the lack of uniform standards forregulation of cryptocurrency circulation and the rapid development of digital technologies, existing regulatory approaches may be ineffective. Therefore, NAPA proposed to create the Uzbekistan Blockchain Valley, a regulatory sandbox for the development of digital technologies, which represents a special legal regime for startups and innovative companies.

The main activities of the residents of the Regulatory Sandbox of Uzbekistan will include:

• blockchain development and implementation;
• OTC transactions with digital assets;
• private and industrial mining;
• cryptocurrency exchange services, as well as cryptocurrency wallet services;
• stock token offering (STO);
• other activities related to blockchain and the circulation of digital assets.

To become a resident of the Regulatory Sandbox,Firms should not only engage in one of these activities, but also have their own unique technology suitable for testing in the sandbox, or apply a peculiar approach to the use of well-known technologies. In addition, such companies should work out a further development plan with targets, assess risks and draw up an action plan to minimize them, as well as have written confirmations of potential customers about their willingness to participate in the project.

The deadline for implementing projects is 12months, and this period can be extended by no more than 24 months. If, after the specified period has passed, the project will prove its effectiveness, the authorities of Uzbekistan will decide to introduce the relevant provisions in the regulatory legal acts of the Republic of Uzbekistan, and the project will continue to develop beyond the framework of the Regulatory Sandbox. If after analysis of the project it is found to be ineffective, its further implementation will be discontinued.

According to NAPU, the regulatory sandbox will serve“Intermediate link” for creating an effective mechanism for regulating the cryptocurrency turnover and introducing the blockchain in various fields of activity. At the same time, the standards of the International Financial Action Task Force on Money Laundering (FATF) with respect to virtual assets will be respected. NAPU will take a cautious approach in creating a regulatory environment for cryptocurrencies in order to protect the rights and interests of citizens, as well as prevent the use of digital assets for money laundering and terrorist financing.

Initiatives to create regulatory sandboxesare being put forward in different countries, which indicates their readiness to actively implement blockchain to develop their economies. Last month, the Ministry of Economic Development of the Russian Federation proposed to create Experimental Legal Regimes in the country, providing for cryptocurrency startups relaxations in the field of currency control and regulation, as well as in relation to the size of the authorized capital. The state of Hawaii also intends to create a “Digital Currency Innovation Lab,” in which cryptocurrency issuers will be able to operate in Hawaii without a state financial services license.

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