Kyrgyzstan’s central bank moves to regulate cryptocurrencies with new draft law

Seems like the entire world is taking notice of Bitcoin and the wider cryptocurrency market. The Central Asian country of Kyrgyzstan is the latest to do so after the National Bank of the Kyrgyz Republic (NKBR) moved to regulate cryptocurrencies, specifically, the activities of entities that provide services for the purchase and sale of cryptocurrencies and operations within cryptocurrencies.

In fact, the NBKR is in the process of collecting recommendations for the proposal from the public.

The purpose of the proposed regulations is to create favorable conditions for the development of technologies and the market, while also minimizing relevant risks and protecting consumer rights.

Interestingly, the NKBR cited the lack of a favorable environment for the development of technology and business, protection of the rights of consumers and investors, the emergence of fraudulent schemes, and the financing of criminal activities as the reasons motivating the proposed regulation.

Reportedly, Kyrgyzstan also has no statistical data on the number of business entities that would be finally subject to the proposed regulations. In fact, the NKBR has put this down to the lack of regulations and the chaotic nature of the crypto-market.

The proposed regulations are expected to address these issues and they are expected to ensure transparency of cryptocurrency turnovers, while also including an optimal tax on crypto.

It should be mentioned, however, that the NKBR acknowledged the possibility that there might be a paucity of mechanisms to implement these regulations due to technological features and the cross-border nature of cryptocurrencies.

In this way, it will be difficult to develop an optimal tax regime, while also ensuring effective monitoring of transactions for the exchange of cryptocurrencies.

In fact, the United States’ Financial Crimes Enforcement Network (FinCEN) has also noted the same from a compliance point of view, adding that it is still difficult to define ‘cross-border payments’ in the virtual asset world.

Although cryptocurrencies are legally treated commodities in Kyrgyzstan, this is the first step towards the regulation of this fairly new space within the country.