Uzbekistan has turned the entire Republic of Karakalpakstan into a special cryptocurrency mining zone, granting tax holidays until 2035, wider access to electricity and a bespoke regulatory regime in a bid to attract licensed mining companies and boost the region’s economy.
Under a presidential resolution that came into force on 20 April, the territory has been officially designated the Beshkala Mining Valley. The move creates a controlled environment for crypto mining, which the government has directly tied to its broader development strategy for Karakalpakstan.
Licensed operators within the valley will be able to draw electricity not only from the national grid but also from renewable sources such as solar power and from hydrogen-based generation. At the same time, the new rules open clear legal routes for the sale of mined digital assets, whether through licensed crypto exchanges in Uzbekistan, foreign trading platforms, direct contracts, or by converting them into other liquid crypto assets.
However, while companies are free to sell crypto assets on international markets, all revenue from those sales must ultimately be transferred to bank accounts held in Uzbekistan. Authorities say the requirement is designed to keep mining income inside the country’s regulated financial system and to maintain oversight of flows linked to the sector.
Strict residency and licensing rules
Only legal entities registered in Karakalpakstan will be eligible for resident status in the Beshkala Mining Valley. Businesses seeking to operate there must first obtain this resident status from the zone’s directorate before applying for a crypto mining licence.
Licensing will continue to be issued under the supervision of the National Agency for Perspective Projects, which remains the main regulator for Uzbekistan’s crypto industry. A dedicated directorate will manage the mining valley on a day-to-day basis, handling applications from prospective miners and overseeing implementation of the region’s development policies linked to the project.
The framework also allows mining companies to repurpose excess heat generated by their equipment for greenhouse farming on agricultural land, turning waste energy from mining operations into an additional economic activity.
Long tax holiday and monthly fee
One of the key financial incentives in the resolution is a full exemption from taxes and mandatory payments on income generated from mining activities until 1 January 2035. The tax break is intended to make the Beshkala Mining Valley more attractive to investors considering large-scale crypto operations.
Alongside those incentives, the authorities have introduced a mandatory contribution for residents. Under a presidential decree signed on 17 April and effective from 20 April, companies in the zone must pay a monthly fee equal to 1% of their crypto mining income to the valley’s directorate. This obligation applies even while they benefit from the extended tax holiday.
The government has also tightened financial rules around the treatment of proceeds from mining. Residents are permitted to sell mined assets via domestic crypto exchanges, overseas platforms, direct agreements or by swapping them for other liquid cryptocurrencies, but in every case proceeds must be channelled back to Uzbek bank accounts.
Officials say this model aims to combine access to global crypto markets with the goal of anchoring mining-related capital within the domestic banking system.
Policy shift on power sources
The new framework marks a clear change from earlier rules adopted in October 2023, which required all miners to secure official authorisation before starting operations and to rely primarily on electricity generated from solar power, except in cases explicitly provided for in legislation.
Under the Beshkala Mining Valley regime, approved residents retain the licensing requirement but gain much more flexibility over energy supplies, with permission to use the unified national grid alongside renewable and hydrogen-based power sources. Authorities argue this approach maintains regulatory control while making large-scale mining projects more viable.
Uzbek law continues to define crypto mining as the computational process that maintains distributed ledgers by validating blocks and ensuring the integrity of networks. The activity remains confined to legal entities, meaning individual or home miners are not allowed to operate under the current rules.
Part of wider tech push in Karakalpakstan
The establishment of the Beshkala Mining Valley is being presented as part of a wider effort to draw investment into Karakalpakstan, which the government has identified as a priority region for economic development.
Officials have linked the mining initiative to plans to raise living standards and to promote more efficient use of renewable energy resources through tightly regulated crypto projects.
The new zone follows an earlier technology-focused programme created for Karakalpakstan in 2025, when Uzbekistan approved a separate tax-free area for artificial intelligence and data centre projects. That scheme offered discounted electricity tariffs and tax incentives to foreign investors, with reports indicating that investments of at least $100m could qualify for exemptions from taxes and customs duties until 2040.
Authorities said at the time that the AI and data centre initiative was designed to attract more than $1bn in foreign investment by 2030, placing the Beshkala Mining Valley within a sequence of long-term, technology-led development plans centred on the region.
