"Zero Taxes Until 2035"...Will Uzbekistan Become a New Holy Land for Virtual Asset Mining?

▲ Uzbekistan, cryptocurrency mining/AI generated image

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

According to Bitcoinist, a cryptocurrency specialized media outlet, on April 23 (local time), the Uzbek government 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 the 20th, 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, effective until January 1, 2035. Companies that acquire resident status within the special zone will be fully exempt from major taxes, including corporate tax, during this period. Instead, they are required to pay 1% of their mining revenue as a monthly fee to the board under the Karakalpakstan Council of Ministers. The Uzbek government proposed these extraordinary 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 mandating the exclusive use of solar power generation for virtual asset mining companies in 2023 has been lifted through this decree. Miners in the Besqala Mining Valley can now utilize renewable energy, hydrogen energy, and even the national power grid. Although a higher tariff will apply when using the national power grid compared to general rates, the opening of power source options, which were previously prohibited, is expected to significantly 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 zone offering tax exemptions until 2040 for foreign companies investing over $100 million in the region. Authorities expect to attract over $1 billion in foreign direct investment by 2030 through this series of policies.

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

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