Overview of Cryptocurrency Taxation and Regulation in Kyrgyzstan

1 Introduction

Recently, the government of Kyrgyzstan has been frequently interacting with senior executives from a well-known encryption cryptocurrency exchange platform. At the beginning of May, the executive showcased the local "888BNB" license plate on social media and expressed appreciation. Meanwhile, the President of Kyrgyzstan met with the executive and invited them to join the national cryptocurrency committee. The executive then suggested including BNB and BTC in the country's cryptocurrency reserves. This article will explore the attractiveness of Kyrgyzstan and the characteristics of the country's tax and regulatory system regarding cryptocurrency assets.

1.1 National Overview

The Kyrgyz Republic is located in the northeastern part of Central Asia and serves as an important hub connecting Central Asia, Western Europe, and East Asia. The capital is Bishkek, and the official language is Russian. In recent years, Kyrgyzstan has made significant progress in the encryption asset field, actively formulating relevant regulations to support the development of digital technology and the blockchain ecosystem, becoming a leading country in the Central Asia region for digital asset regulation and market scale development.

1.2 Qualitative Analysis of Encryption Assets

Kyrgyzstan's "Virtual Assets Law" defines virtual assets as electronic digital data that has value, serving as a digital expression of value and a means of proving property or non-property rights. These assets are created, stored, and circulated using distributed ledger technology or similar technologies, and are distinct from currency units, means of payment, and securities. Encryption assets are a form of virtual assets.

2 Tax Policy

2.1 Overview of the Tax System

The legal system of Kyrgyzstan is based on the legal framework of the former Soviet republics and is similar to the legal systems of other former Soviet republics such as the Russian Federation. In terms of taxation, it mainly follows the Kyrgyz Tax Code. The main types of taxes include corporate income tax, personal income tax, value-added tax, sales tax, and other central taxes, as well as property tax and land tax, which are local taxes. Additionally, various special tax systems have been introduced, such as simplified tax systems, digital currency mining tax, and special tax systems for free economic zones.

2.2 encryption tax policies and latest developments

Starting from August 2020, Kyrgyzstan has imposed a special tax on encryption mining activities. The mining tax is based on the amount of electricity consumed, with a tax rate of 15%. An income tax of 10% is payable on the excess profits from the sale of encryption assets. Sales of encryption assets are exempt from value-added tax but are subject to a sales tax of 2% or 3%.

In October 2024, the government began discussions to raise the national tax rate in the non-bank financial sector (including encryption asset exchanges, mining organizations, etc.) to increase non-tax revenue and enhance financial stability.

3 Encryption Asset Regulatory Dynamics

3.1 encryption asset regulatory policy

The "Virtual Asset Law" passed in 2022 laid the foundation for the regulation of encryption assets. The law clarifies the licensing system for Virtual Asset Service Providers (VASPs), which is uniformly regulated by the National Financial Market Regulatory Service. As of January 2025, 144 operating licenses for encryption asset service providers have been issued.

In January 2025, the government passed a resolution to amend the requirements for encryption asset trading operators and exchange operators, raising the entry threshold and operational standards. In February of the same year, regulators began discussions on the legal regulation of encryption asset service provider activities, aiming to enhance market transparency and security.

3.2 Latest developments in the local encryption industry

The Ministry of Finance of Kyrgyzstan has established Central Asia's first national encryption asset exchange, Coin National Exchange. The government also supports the development of stablecoins, such as A7A5, which is pegged to the Russian ruble, and USDKG, which is pegged to the US dollar and backed by gold. In addition, the government is promoting the development of the digital som (CBDC).

4 Summary and Outlook

Kyrgyzstan is actively promoting the development of the encryption industry, optimizing tax policies and improving regulatory frameworks. Its friendly attitude and clear systems create favorable conditions for investors. With the development of encryption banks, national exchanges, and stablecoins, Kyrgyzstan is expected to become a regional center for encryption assets, driving the development of innovative infrastructure and industry in the Central Asian region.