Uzbekistan created a state-supervised crypto mining zone called "Besqala Mining Valley" in the Republic of Karakalpakstan on April 17, 2025. A presidential decree took effect April 20. The zone gives registered companies the right to mine crypto, sell it on foreign platforms, and use multiple power sources — but requires all proceeds to flow into local bank accounts.

The setup represents a clear pivot from Uzbekistan's earlier mining rules, which restricted miners to solar power only. The new zone permits renewable energy, hydrogen, and grid electricity, with higher tariffs applied for grid usage.

Tax exemptions run through January 1, 2035. Miners inside the zone pay a monthly fee equal to 1% of mining income to the zone's directorate. Officials have two months to submit draft amendments to the national tax code.

Why Karakalpakstan

Karakalpakstan is Uzbekistan's largest administrative region by area but among its least developed. A 2025 UN Development Programme report described the region as having high poverty rates and limited industrial development. The government is using it as a testing ground for special-zone investment incentives, having already established a separate tax-free zone there for artificial intelligence and data center projects in November 2025. Foreign firms investing $100 million or more in that AI zone receive full tax and duty exemptions until 2040. Uzbekistan expects the AI zone alone to attract over $1 billion in foreign investment by 2030.

How Uzbekistan Got Here

Uzbekistan's crypto policy began taking shape in 2018 when presidential decrees legalized crypto trading. The government reversed course in December 2019, banning residents from purchasing crypto entirely. That restriction lifted again as the country rebuilt its regulatory framework.

By April 2022, President Shavkat Mirziyoyev established a new regulatory body — the National Agency of Perspective Projects (NAPP) — and mandated that all exchanges, mining pools, and custodians operating in the country register locally. The 2022 decree required miners to use only solar energy, with grid users paying double the standard tariff.

From January 1, 2023, residents could only buy or sell crypto through licensed domestic exchanges. Foreign platforms were blocked. NAPP gradually expanded its enforcement, and in April 2024, Uzbekistan introduced criminal penalties for illegal crypto activities, including mining outside the licensed framework, with imprisonment of up to five years for serious offenses.

Despite having mining rules on the books since 2023, no legal crypto farms were registered in the country for years after the permit framework was adopted. Uzbekistan's first mining permit only went to a private firm called NexaGrid in February 2026, nearly two and a half years after the rules were written.

What the New Zone Changes

The Besqala Mining Valley addresses several friction points from the earlier framework. The solar-only power rule effectively blocked most large-scale operations, since grid access was expensive and dedicated solar infrastructure required upfront capital that small entrants lacked. Opening access to grid electricity — even at higher tariffs — removes that barrier.

The right to sell mined assets on foreign platforms is also new. Previously, Uzbekistan required all crypto transactions by residents to pass through domestic exchanges. The carve-out for zone miners creates a two-tier system: domestic users remain locked to local platforms, while zone participants can access international liquidity directly.

The controls on proceeds — requiring funds to return to Uzbekistani bank accounts — preserve government visibility over capital flows. This is a pattern common in jurisdictions that want foreign currency earnings from crypto activity while maintaining financial system oversight.

The Broader Picture

By 2024, nearly 1.5% of Uzbekistan's population held cryptocurrency, and licensed domestic providers processed over $1 billion in transactions. The country ranked 33rd globally in adoption, leading Central Asia alongside Kazakhstan and Kyrgyzstan.

Kazakhstan built a large mining sector after China's 2021 ban on crypto mining pushed operations across the border. That inflow strained Kazakhstan's electricity grid and prompted repeated regulatory crackdowns. Uzbekistan is attempting a more controlled version of that model: geographically contained, with defined power rules and revenue repatriation requirements.

The trade-off is real. The zone's controls could deter large international miners who prefer jurisdictions with fewer reporting requirements or cheaper electricity. The 1% monthly fee on income adds a recurring cost that does not exist in competing locations. Tax exemptions help, but they are time-limited, and the eventual transition to full taxation adds uncertainty for long-term capital decisions.

For Bitcoin miners evaluating locations, Uzbekistan now offers a legal entry point that did not exist six months ago. Whether the zone's infrastructure, power capacity, and regulatory stability prove competitive with Kazakhstan, Russia, or off-grid operations in other markets remains to be seen.