Analysis of Kyrgyzstan's Encryption Asset Policy: A Comprehensive Overview of Taxation and Regulatory System

1 Introduction

Recently, the government of Kyrgyzstan has been active in the field of encryption assets. In early April, the country's National Investment Agency signed a memorandum of understanding with an executive from a trading platform to collaborate on encryption assets and blockchain technology. In early May, the executive showcased a local license plate on social media and expressed appreciation for it. At the same time, the President of Kyrgyzstan invited the executive to join the National Encryption Committee, who then suggested including certain cryptocurrencies in the national reserves. So, why is Kyrgyzstan so favored? What are the characteristics of the country's taxation and regulation of encryption assets? This article will provide you with a detailed analysis.

1.1 National Overview

The Kyrgyz Republic is located in the northeastern part of Central Asia and is an important node connecting Western Europe and East Asia, with its capital being Bishkek. The official languages of the country are Kyrgyz and Russian, and the currency is the Som. In recent years, Kyrgyzstan has made significant progress in the encryption asset field, actively formulating relevant regulations to support the development of digital technologies and the blockchain ecosystem, becoming a leader in digital asset regulation and market scale development in the Central Asian region.

1.2 Qualitative Analysis of Encryption Assets

According to Kyrgyzstan law, virtual assets are a set of data that exist in electronic digital form, have value, and can be used as a digital expression of value and a means of proving property or non-property rights. These assets are created, stored, and circulated through distributed ledger technology or similar technologies, and are different from traditional currencies, payment means, and securities. Encryption assets are a form of virtual assets.

2 Tax Policy

2.1 Tax System Overview

The legal system of Kyrgyzstan originates from the Soviet era and shares similarities with other former Soviet countries. After gaining independence, the country enacted a new constitution and a series of laws covering various fields. In terms of taxation, this mainly includes central taxes such as income tax and turnover tax, as well as local taxes like property tax and land tax. In addition, various special tax systems have been introduced, such as a simplified tax system, taxation on digital currency mining, and e-commerce tax.

Corporate income tax applies to resident and non-resident enterprises, with the scope of taxation being global income and income sourced from Kyrgyzstan, respectively. Personal income tax varies depending on whether the taxpayer is a resident and their specific identity. Value-added tax applies to enterprises and individuals selling goods or providing services within the territory, as well as to enterprises importing goods.

In order to promote economic development, Kyrgyzstan continuously simplifies its tax system, optimizes the tax structure, and introduces digital tools to establish a more efficient and fair tax system.

2.2 encryption tax policies and latest developments

In August 2020, Kyrgyzstan imposed a special tax on encryption mining activities. Mining enterprises and individuals are required to pay a mining tax instead of an income tax, with a tax rate of 15%, based on the amount of electricity consumed for mining.

Excess profits from selling encryption assets and the value of encryption assets obtained without compensation are subject to a 10% income tax. It is worth noting that exchanges between encryption assets are not considered a sale. Sales of encryption assets are exempt from value-added tax, but a sales tax of 2% or 3% is required, depending on the type of industry.

In October 2024, Kyrgyzstan began discussions on raising the national tax rate for the non-bank financial sector (such as encryption asset exchanges, insurance institutions, etc.) to increase non-tax revenue and enhance financial stability.

3 Encryption Asset Regulatory Dynamics

3.1 encryption asset regulatory policy

In 2022, Kyrgyzstan established a regulatory foundation for the creation, issuance, storage, and circulation of encryption assets through the "Virtual Assets Law." The law clarified the licensing system for virtual asset service providers (VASPs), which is regulated uniformly by the National Financial Market Regulation Service. As of January 2025, 144 operating licenses for encryption asset service providers have been issued.

In January 2025, Kyrgyzstan passed a resolution to raise the requirements for encryption asset trading operators and exchange operators, including aspects such as customer identity verification, publication of trading rules, minimum authorized capital, and more. At the same time, the regulation of encryption asset issuance has also been adjusted.

In addition, Kyrgyzstan is actively promoting the integration of encryption banking technology into its banking system. In October 2024, the Ministry of Economy submitted a bill to the parliament aimed at establishing encryption banks, with the goal of providing users with a more secure service environment and promoting the modernization of the financial system.

In February 2025, the Financial Market Regulatory Authority began discussions on the legal regulation of activities by encryption asset service providers to enhance market transparency and security, and to strengthen protection for market participants.

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, which was officially registered in December 2024, with an initial authorized capital of 100 million som.

In April 2025, the Kyrgyz company Old Vector issued the stablecoin A7A5, pegged 1:1 to the Russian Ruble, with government support. Previously, the country had also launched the stablecoin Gold Dollar (USDKG), pegged to gold and the US dollar.

In terms of CBDC, the President of Kyrgyzstan signed a bill in April this year that grants legal status to the "digital som", laying the legal foundation for a potential future issuance of CBDC.

4 Summary and Outlook

Kyrgyzstan is actively creating a favorable environment for industry development by optimizing the taxation policy and regulatory system for encryption assets. A clear tax system and competitive tax rates have enhanced the country's attractiveness in the global encryption asset market. At the same time, the government's friendly attitude towards encryption assets has also created stable and favorable operating conditions for investors and market participants.

With the development of encryption banks, national exchanges, and stablecoins, the Kyrgyzstan encryption asset industry will further integrate with the traditional financial system. This will not only help the country create a competitive advantage in the field of encryption assets, but also promote the development of innovative infrastructure in the Central Asian region and the flourishing of the overall industry.