Overview of Kyrgyzstan's Encryption Asset Taxation and Regulatory System

1. Introduction

Recently, the government of Kyrgyzstan has been interacting frequently with executives from a well-known encryption exchange. In early May, this executive showcased the local license plate "888BNB" on social media and expressed admiration for it. At the same time, the President of Kyrgyzstan invited the executive to join the national encryption committee, and the executive suggested incorporating BNB and BTC into the national cryptocurrency reserves. So, why does Kyrgyzstan place such importance on this executive? What are the characteristics of the country's tax and regulatory system regarding encryption assets? This article will provide detailed answers to these questions.

1.1 National Overview

The Kyrgyz Republic is located in the northeastern part of Central Asia and serves as an important hub 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 field of encryption assets, actively formulating relevant regulations, supporting the development of digital technologies and the blockchain ecosystem, and becoming a leader in the regulation of digital assets and market scale development in the Central Asian region.

1.2 Qualitative Analysis of Encryption Assets

According to the Virtual Assets Law of Kyrgyzstan, virtual assets are defined as a collection of electronic digital data that has value, serving as a digital expression of value and a means to prove property or non-property rights. These assets are created, stored, and circulated through distributed ledger technology or similar technologies, distinguishing them from currency units, 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 is derived from the former Soviet republic, and it shares similarities with the legal systems of other former Soviet countries such as the Russian Federation. Its legal system is divided into four levels: constitutional laws, codes, laws, and regulations. After gaining independence, the country enacted a series of new laws, including the new Constitution, Civil Code, Foreign Trade Law, Tax Law, and Investment Law.

In terms of taxation, the tax authorities of Kyrgyzstan manage taxpayers according to the Tax Code. The main tax types include corporate income tax, personal income tax, value-added tax, sales tax, excise tax and other central taxes, as well as property tax and land tax which are local taxes. In addition, special tax systems such as simplified taxation, taxation on digital currency mining, and e-commerce tax have also been introduced.

2.2 encryption tax policies and latest developments

In August 2020, Kyrgyzstan implemented a special tax regime for cryptocurrency mining activities. Companies and individuals engaged in mining are required to pay a cryptocurrency mining tax, with a rate of 15%, based on the amount of electricity consumed during the mining process.

Excess profits from the sale of encryption assets and the value of encryption assets obtained without payment are subject to a 10% income tax. It is worth noting that exchanges between encryption assets are not considered as sales.

In Kyrgyzstan, the sale of encryption assets is exempt from value-added tax. However, depending on the industry type, a sales tax of 2% or 3% may be required.

Recently, the government of Kyrgyzstan is discussing amendments to the national tax rates in the non-bank financial sector (including encryption asset exchanges, insurance institutions, etc.) to increase non-tax revenue and financial stability.

3. Encryption Asset Regulatory Dynamics

3.1 encryption asset regulatory policy

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

In January 2025, the government passed a resolution to amend the requirements for encryption asset trading operators and exchange operators, including increasing the minimum authorized capital and strengthening customer identity identification and verification. At the same time, there were also changes to the regulatory provisions for encryption asset issuance.

Kyrgyzstan is actively promoting the incorporation of encryption banking technology into its banking system. In October 2024, the Ministry of Economy submitted a bill to the parliament to establish encryption banks, aiming to provide better protection for users' rights and to modernize the financial system.

3.2 Latest developments in the local encryption industry

The Ministry of Finance of Kyrgyzstan has created 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 KGS.

In terms of stablecoins, in April 2025, the Kyrgyzstani company Old Vector issued the stablecoin A7A5, which is pegged 1:1 to the Russian ruble. Earlier, the country also launched the stablecoin Gold Dollar (USDKG), which is pegged to gold and the US dollar.

In April this year, the President of Kyrgyzstan signed a bill granting "digital som" legal status, laying the foundation for a possible future issuance of CBDC.

4. Summary and Outlook

Kyrgyzstan is actively promoting the development of the encryption industry by optimizing tax policies and regulatory systems to create favorable conditions for investors and market participants. With the development of encryption banks, national exchanges, and stablecoins, Kyrgyzstan is expected to further consolidate its position as a regional encryption center, promote the integration of encryption assets with the traditional financial system, and facilitate the development of innovative infrastructure and the overall flourishing of the industry.