On July 8, Uzbekistan’s Ministry of Justice approved a regulation governing registration and operations of the residents of the Besqala Mining Valley. Prospectors here won’t be mining for gold, uranium, or copper – they are mining cryptocurrency.
Developed by the National Agency for Prospective Projects (NAPP), the new regulation is in accordance with the presidential resolution from April 17 to establish the first-of-its-kind special crypto mining zone in the Republic of Karakalpakstan, covering its whole territory. Within Besqala, incomes from crypto mining are exempted from taxes until 2035. That creates an incentivizing environment for large mining operators, although it’s notable that only locally registered legal entities can become Besqala residents.
Uzbekistan’s position on cryptocurrency is somewhere in between full prohibition and unrestricted permission. The state allows crypto activities to exist, but they must be traceable and financially controllable. Initially, in 2018, Tashkent established a highly controlled approach toward cryptocurrencies. Various crypto activities, including mining, were recognized and regarded as an economic and technological opportunity, but within limits. From October 2018, crypto activities required state licensing, to be handled by the National Agency for Project Management under the president. Tashkent also granted certain perks for crypto activities, such as exemption from taxes and ordinary currency-control rules. Mining was not yet treated as an electricity or environmental threat.
The 2022 reforms in the crypto field positioned the NAPP as a principal regulator responsible for licensing, registering, and even investigating foreign entities. Crypto mining itself became a corporate practice – only legal entities can mine – and was subject to Uzbekistan’s energy policy – mining must use electricity generated by solar stations. From 2023, crypto mining practices required a permit from the NAPP, not a license. The permits are issued for five years and are listed publicly by the NAPP.
The 2023 amendments to Uzbekistan’s Criminal Code, which entered into force from January 2024, had implications for crypto regulations. Initially, violations in the crypto sphere, including in mining activities, might result in administrative punishments such as confiscation of equipment and a fine. Now, such violations lead to criminal liability. Covert (yashirin) mining can be criminal from its first occurrence. The law also legally defined “crypto asset” and “mining” and entered them into the country’s Criminal Code.
The introduction of Besqala Mining Valley represents more opportunities for the state to supervise crypto mining practices. This is important especially in relation to energy consumption, since mining requires a lot of it. In 2024 alone, 91 crypto mining farms were found to be engaging in electricity theft. In Besqala, crypto miners now have more liberalized electricity use: they can use many forms of renewable energy and hydrogen-generated electricity, while in other parts of Uzbekistan only solar electricity is allowed for mining. Apart from that, Besqala residents may connect to the national grid but have to pay twice as much as regular users. Concentrating mining operators in one geographic location makes the industry’s activities, including electricity use, more visible.
What is important is that the Besqala Mining Valley is not a separate industrial park, but covers all of Karakalpakstan, which is almost 40 percent of Uzbekistan’s total territory. This might make environmental monitoring hard. Questions such as electronic waste, water consumption, cooling, noise, heat discharge (except for the heat being reused for greenhouses – but this is not mandatory for mining operators), equipment disposal, or environmental-impact assessments are yet to be addressed. Crypto miners paying twice as much to use electricity from the national grid also does not guarantee that local households can avoid electricity shortages, especially in mid-summer when everyone wants to use air conditioning.
Just between July 13 and 19 the People’s Receptions of the President of the Republic of Uzbekistan received 1,012 applications regarding power outages and 356 on repairing electrical facilities. In the first half of 2026, electricity losses reportedly amounted to 17.2 percent (equal to 4.8 billion kilowatt-hours). Current crypto mining regulations, however, do not establish maximum grid capacity for a single mining operator.
The Besqala Mining Valley can also potentially contribute to the economy of Karakalpakstan, a region that is already geographically isolated and historically in need of additional measures to improve living conditions due to environmental challenges stemming from the drying Aral Sea. In August 2025, a presidential decree to accelerate the socio-economic development of Karakalpakstan was issued, including the idea of creating a mining zone among other measures. Due to tax privileges and more liberal energy use, large mining operators might relocate to Karakalpakstan. However, mining and other crypto-related activities create very few permanent positions. And if foreign miners come, they bring their own employees. The current regulations do not establish a minimum for locally created jobs.
The success of the valley will be seen later, once it is visible how much new electricity generation crypto miners build (if they ever do), how much they draw from the existing grid, how it will affect the local households, and how much foreign currency revenue reaches Uzbek banks. For now, the launch of Besqala Mining Valley represents Tashkent’s effort to control a largely informal and difficult-to-regulate activity within a set territory and managed regulations.
Discussion about this post