Legal Regulation of Cryptocurrencies in Kyrgyzstan: Current Practices and Prospects

Cryptocurrencies have rapidly established their place in the global financial system, and Kyrgyzstan has not remained on the sidelines of this process. In recent years, the state has taken a number of significant steps to legalize and regulate digital assets. In 2022, the Law “On Virtual Assets” was adopted, laying the foundation for the development of a legal framework in this area.

• The law defines that regulated activities in the field of virtual assets in the country include mining, issuance and initial offering of virtual assets, as well as the activities of virtual asset service providers. At the same time, according to the law, virtual assets are not recognized as legal tender, currency, or securities within the territory of the Kyrgyz Republic, but they are allowed to circulate under a special legal regime.

According to Article 26 of the Law on Virtual Assets, services related to virtual assets include:

• the purchase and sale (exchange) of virtual assets;
  
  
• exchange between virtual assets;
  
  
• transfer of virtual assets;
  
  
• storage, management, and control of virtual assets;
  
  
• provision of financial services related to the initial offering and/or sale of the issuer’s virtual assets.

A virtual asset service provider is defined as a legal entity registered in the territory of the Kyrgyz Republic that offers one or more of the above-mentioned services as a business activity under a license.

In practice, this means that any business engaged in the exchange, issuance, or custody of crypto assets must obtain a license from the Financial Market Regulation and Supervision Service under the Ministry of Economy and Commerce of the Kyrgyz Republic, undergo a compliance check, and adhere to transparency requirements, including the disclosure of ultimate beneficial owners.

Specifically, to obtain a license as a virtual asset exchange operator, a company must have a minimum charter capital of 40 million soms, while a virtual asset trading operator must hold 10 billion soms in charter capital.

To obtain a certificate for industrial or private mining, the applicant must prepare and submit a prescribed set of documents to the Financial Market Regulation and Supervision Service.

For cryptocurrency users, this has created a safer environment, in which digital assets can be legally exchanged and invested in without the risk of violating the law. At the same time, mining has also been brought under regulation: since 2020, electricity consumption in the mining sector has been subject to taxation, along with the requirement for the registration of mining farms.

A mining tax was thus introduced: the rate is 10% of the electricity fee, including VAT and sales tax. This tax, introduced in 2020, replaced three other taxes — corporate income tax, VAT on taxable supplies, and sales tax.

Dozens of exchange operators and crypto exchanges have already been registered in the country, and in 2024 alone, the industry contributed more than 800 million soms in taxes to the state budget. This indicates that regulation is working and the market is developing. However, alongside these successes, unresolved issues remain. One of the main challenges is the insufficient integration of the crypto business with the banking system. Currently, banks are extremely reluctant to open accounts for virtual asset service providers, citing a high level of risk. This creates obstacles for fund circulation and settlements, and as a result, slows down the sector’s growth.

In addition, Kyrgyzstan still lacks a comprehensive digital economy strategy into which cryptocurrencies could be organically integrated. Legislation is evolving reactively, responding to business demands rather than being shaped by a coherent long-term policy. This increases legal uncertainty and reduces the interest of international investors. Another important point is the low level of awareness among entrepreneurs, many of whom do not fully understand how to conduct crypto-related activities legally and in compliance with the law.

LEX Law Firm is already providing legal support to clients in the field of cryptocurrencies — from obtaining licenses and offering tax advice to accompanying mining projects. We understand how the market works and are ready to help businesses adapt to the new regulatory landscape. Issues that once seemed complex can now be resolved with practical legal solutions when supported by professional expertise.

If you are planning to start or are already engaged in crypto activities, we are open to dialogue and invite you to begin with a consultation — to build a legally secure and sustainable business model in the crypto economy.