Uzbekistan opens state-backed crypto mining zone with tax breaks

Uzbekistan has created a supervised crypto mining zone in Karakalpakstan under a presidential resolution signed on April 17. 

The framework allows approved mining firms to operate in a defined area, sell mined digital assets on foreign platforms, and keep sale proceeds within Uzbekistan’s banking system.

Meanwhile, the decree took effect on April 20 and established the “Besqala Mining Valley” across the Republic of Karakalpakstan. Registered legal entities can apply for resident status through a new directorate under the republic’s Council of Ministers and carry out mining under state oversight.

The new framework gives approved companies the right to mine crypto assets inside the zone and sell those assets on local exchanges or foreign platforms. It also allows direct contracts and swaps into other liquid crypto assets, widening the options available to miners operating in the area.

At the same time, the decree keeps tight control over how revenue moves. Companies must transfer proceeds from crypto sales to bank accounts in Uzbekistan, keeping funds inside the local financial system even when sales take place outside the country.

Additionally, the decree offers tax exemptions for mining zone residents until Jan. 1, 2035. In return, companies must pay a monthly fee equal to 1% of mining income to the zone’s directorate. Officials must also submit proposed tax code changes within two months to align the rules with the new system.

The package appears designed to make the zone more attractive to investors. Karakalpakstan has remained a focus for investment efforts after development reports described the region as facing high poverty levels and limited industrial growth.

Power rules expand beyond solar

The latest decision also changes part of Uzbekistan’s earlier crypto mining policy. In 2023, the National Agency for Perspective Projects required licensed miners to use only solar power for crypto mining operations.

Under the new decree, zone residents can use a broader mix of power sources. These include renewable power, hydrogen, and grid electricity, though miners using grid power will face higher tariffs.

Moreover, the mining zone fits a wider economic strategy in Karakalpakstan. In 2025, the government also moved to create a separate tax-free zone for artificial intelligence and data center projects in the same region.

That earlier plan offered discounted electricity and tax exemptions to foreign investors. Reports said firms investing at least $100 million could receive full tax and duty exemptions until 2040, with the country targeting more than $1 billion in foreign investment from that project by 2030.