Uzbekistan has established "State-Approved Mining Zones" in impoverished areas... The foreign exchange inflow experiment has officially begun

Industry-weak regions with high poverty rates are choosing “cryptocurrency mining” as a channel to attract overseas capital. Uzbekistan has established a nationally approved mining special zone within its Karakalpakstan Autonomous Republic, officially launching an experiment to relocate economic activities to underdeveloped areas.

According to a presidential decree in Uzbekistan, this area is named “Besqala Mining Valley,” signed on April 17 and effective from April 20. Registered companies can mine digital assets and sell them on domestic exchanges or even overseas platforms, but with the condition that the profits must be deposited into Uzbek banks.

The core is “capital flowing back domestically”… profits deposited into banks, rules based on the presidential decree.

This measure runs counter to the trend of capital naturally flowing into growing regions. The United Nations Development Programme pointed out in its 2025 report that Karakalpakstan has high poverty and a weak industrial ecosystem. Therefore, Uzbekistan aims to guide capital and employment into “specific areas” by incorporating mining industry regulation.

Companies qualifying as zone residents (settled) are allowed to mine and sell, but capital flows will be restricted within the financial system. Even if digital assets are sold overseas, the final profits are designed to be remitted back to domestic banks, aiming to increase foreign exchange inflows while controlling money laundering risks. Considering the exchange rate of 1 USD = 1,482.50 KRW, the scale of USD profits from large-scale mining operations flowing into the country will be a key variable influencing policy effects.

Tax exemptions until 2035… replaced by a 1% monthly fee

The incentives are unusual. Companies settled before January 1, 2035, are exempt from taxes, replaced by a 1% monthly fee on mining income paid to the zone management agency (under the Karakalpakstan Cabinet). This structure, replacing compliance and operational costs with a “service fee,” aims to lower the entry barrier for large enterprises.

However, the system is not yet complete. It is reported that authorities have received instructions to submit amendments to national tax laws within two months, with detailed tax systems, accounting, and reporting requirements expected to be further specified. Market focus is on how the attractiveness of tax exemptions and the obligation to deposit profits into domestic accounts will constrain overseas mining companies’ capital utilization strategies.

Relaxed power regulations and the establishment of AI data center zones… infrastructure industry incentives in underdeveloped areas

Power regulations have also changed significantly. Since 2023, Uzbekistan required licensed mining companies to use 100% solar energy, but this presidential decree abolishes that restriction. Companies in Besqala Mining Valley can use a mix of renewable energy, hydrogen, and grid power. Although grid electricity prices are higher, the open choice directly impacts project viability.

This mining zone is not an isolated policy, which is also important. It is reported that Uzbekistan launched a separate tax-free zone for AI and data center projects in Karakalpakstan last November, offering full tax and tariff exemptions until 2040 if foreign companies invest over $100 million (about 148.25 billion KRW). Given that mining and data infrastructure are industries whose success depends on “land, electricity, and regulatory clarity,” Uzbekistan is pursuing a long-term strategy to attract capital-intensive industries based on low costs and underdeveloped regions.

Article summary by TokenPost.ai

🔎 Market interpretation - Uzbekistan has established a “nationally recognized” mining zone in underdeveloped Karakalpakstan, initiating an experiment to direct capital and employment to specific regions - Even if mining profits are sold overseas, funds must ultimately flow back into domestic banks, aiming to expand foreign exchange inflows and anti-money laundering controls - Relaxed power regulations (mandatory 100% solar), enhanced commercial viability, and combined with AI/data center tax-free zones, extend the “power, land infrastructure industry” investment competition 💡 Strategic points - Opportunity: Tax exemption until 2035 + a model of 1% monthly mining income fee reduces initial costs, attracting large enterprises - Check: The obligation to deposit profits into Uzbek banks may restrict overseas companies’ operations in terms of capital recovery, foreign exchange, and remittances - Focus: Expectation of submitting tax law amendments within two months, with detailed accounting, reporting, and taxation scope, which may reassess actual attractiveness - Risks: Allowing use of the national grid increases scalability, but higher electricity prices and energy policy changes could impact profitability 📘 Terminology clarification - Mining zone: A designated area that permits and supports mining with tax, power, and regulatory incentives - Anti-money laundering: Financial regulatory system designed to prevent illegal fund flows (transaction tracking, account attribution, etc.) - Tax exemption: Policy tool to reduce corporate taxes, tariffs, etc., over a certain period to attract investment - National grid: The method of purchasing electricity from the central power system (significantly affecting electricity pricing policies)

💡 FAQs

Q. Why did Uzbekistan establish a mining zone in the underdeveloped region of Karakalpakstan? Karakalpakstan has long been considered a high-poverty, weak industrial base area. The government aims to attract foreign capital and enterprises into this region by providing a clear regulatory framework and incentives through the “mining zone,” creating regional economic activities (investment, employment, infrastructure). Q. What are the core benefits and conditions of Besqala Mining Valley? The benefit is tax exemption until January 1, 2035 (replaced by a 1% monthly fee on mining income). Additionally, digital assets mined can be sold on domestic or overseas platforms. The key condition is that even if sold abroad, profits must be deposited into Uzbek banks. Q. What is the significance of relaxing power regulations for mining business viability? Previously, licensed mining companies were required to use 100% solar energy, but this measure abolishes that restriction, allowing companies to mix renewable energy, hydrogen, and grid power. Access to the national grid significantly enhances operational flexibility, but higher electricity prices require careful cost analysis (profitability).

TP AI notes: The article has been summarized using a language model based on TokenPost.ai. The main content may be incomplete or may differ from actual facts.