"0 won in taxes until 2035"...Will Uzbekistan become a new mecca for virtual asset mining?

▲ Uzbekistan, Cryptocurrency Mining/AI Generated Image

The Uzbek government has designated a specific region, which is experiencing economic difficulties, as a special zone for virtual asset mining, offering unprecedented tax incentives in a bold move to attract global capital.

According to the cryptocurrency specialized media Bitcoinist on April 23 (local time), the Uzbek government has designated the autonomous republic of Karakalpakstan as a state-approved mining zone named 'Besqala Mining Valley'. In accordance with a presidential decree signed on April 17 and effective from April 20, registered companies located in this zone can mine virtual assets and freely sell them on domestic and international exchanges. However, all profits generated through mining must be deposited into an Uzbek bank account.

The most notable aspect of this measure is the long-term Tax Holiday benefit, which applies until January 1, 2035. Companies that acquire resident status within the special zone will receive a full exemption from major taxes, including corporate income tax, during this period. Instead, they are required to pay 1% of their mining income monthly as a fee to the board under the Council of Ministers of Karakalpakstan. The Uzbek government presented these exceptional conditions to establish an industrial base in the underdeveloped Karakalpakstan region and promote the inflow of foreign currency.

Energy regulations have also been significantly relaxed. The regulation, which mandated the exclusive use of solar power generation for virtual asset mining companies in 2023, has been lifted through this new decree. Now, miners located in the Besqala Mining Valley can utilize not only renewable and hydrogen energy but also the national power grid. While a higher tariff will be applied when using the national power grid compared to standard rates, the opening of power source options, which were previously prohibited, is expected to greatly improve the operational flexibility of mining companies.

Uzbekistan's move is part of a broader investment strategy to develop Karakalpakstan into a hub for capital-intensive industries such as artificial intelligence (AI) and data centers. Last November, the government also established a separate special economic zone offering tax exemptions until 2040 for foreign companies investing over $100 million in the region. Authorities expect these series of policies to attract over $1 billion in foreign direct investment by 2030.

Uzbekistan is strengthening its position in the global virtual asset mining market, leveraging affordable land, electricity, and a clear regulatory environment. State-led systematic management and the provision of incentives serve as strong attractions for mining companies seeking new bases due to tightening regulations elsewhere. The Uzbek government aims to address regional economic imbalances and accelerate the digital transformation of the national economy through the formalization of the mining industry.

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