Overview of Kyrgyzstan's Encryption Asset Taxation and Regulatory System

1. Introduction

Recently, the government of Kyrgyzstan has been frequently interacting with senior executives of a well-known cryptocurrency exchange platform. On May 5, the executive showcased a local license plate reading "888BNB" on social media and praised it. Meanwhile, the President of Kyrgyzstan announced a meeting with the executive and invited them to join the national cryptocurrency committee. In response, the executive suggested incorporating BNB and BTC into the country's cryptocurrency reserves. This series of interactions has sparked interest in Kyrgyzstan's cryptocurrency asset policies. This article will delve into the country's tax and regulatory systems in the field of cryptocurrency assets.

1.1 Country Overview

The Kyrgyz Republic is located in the northeastern part of Central Asia and serves as an important hub connecting Central Asia, Western Europe, and East Asia. The capital, Bishkek, is the political, economic, and cultural center of the country. Kyrgyz is the national language, while Russian is the official language. The country's currency is the som. In recent years, Kyrgyzstan has made significant progress in the field of encryption assets, 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 Asia region.

1.2 Qualitative Analysis of Encryption Assets

According to the laws of Kyrgyzstan, virtual assets refer to data sets that exist in electronic digital form, have value, and serve as a digital expression of value and proof of property or non-property rights. These assets are created, stored, and circulated using distributed ledger technology or similar technologies, but do not belong to currency units, means of payment, or 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 former Soviet republic and has similarities with countries such as the Russian Federation. Its legal hierarchy includes constitutional laws, codes, laws, and regulations. After gaining independence, the country enacted a new constitution and a series of laws covering various fields.

In terms of taxation, taxpayers should comply with the provisions of the "Tax Code of Kyrgyzstan." The main types of taxes include corporate income tax, personal income tax, value-added tax, sales tax, and other central taxes, as well as property tax and land tax, which are local taxes. Additionally, there are various special tax systems, such as the simplified tax system, taxation on digital currency mining, and e-commerce tax.

In terms of corporate income tax, resident enterprises are taxed on global income, while non-resident enterprises are only taxed on income sourced from Kyrgyzstan. In terms of personal income tax, resident taxpayers are taxed on global income, while non-resident taxpayers are only taxed on income sourced from Kyrgyzstan. Value-added tax covers the sale of taxable goods within the territory, the provision of taxable services, and the import of taxable goods.

Kyrgyzstan also offers various tax incentives, such as special tax systems for free economic zones and high-tech parks, to promote the development of specific industries and regions.

2.2 encryption tax policies and latest developments

In August 2020, Kyrgyzstan introduced a tax on encryption mining, applicable to companies and individuals engaged in cryptocurrency mining. The tax base is the amount of electricity consumed during the mining process, with a tax rate of 15%.

Income from the trading of encryption assets is subject to income tax at a rate of 10%. Exchanges between encryption assets are not considered a sale. Sales of encryption assets are exempt from value-added tax, but are subject to a sales tax of 2% or 3%.

In October 2024, the government proposed to increase the tax rates in the non-bank financial sector (including encryption asset exchanges, insurance institutions, etc.) with the aim of increasing the country's non-tax revenue and enhancing 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 clarified the licensing system for Virtual Asset Service Providers (VASPs), which is uniformly supervised 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, the government passed a resolution to amend the requirements for encryption asset trading operators and exchange operators, including increasing the minimum authorized capital, enhancing customer identity recognition and verification, etc. At the same time, the regulation of encryption asset issuance was also adjusted.

In October 2024, the government proposed a bill to establish encryption banks, aimed at incorporating encryption banking technology into the existing banking system to provide users with a safer service environment.

In February 2025, regulatory authorities began soliciting opinions on the legal regulation of activities by encryption asset service providers, aiming to enhance market transparency and security, and strengthen protections 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, with an initial authorized capital of 100 million KGS.

In April 2025, the Kyrgyz company Old Vector issued a stablecoin A7A5 pegged 1:1 to the Russian ruble, receiving government support.

Previously, the country also launched a stablecoin called Gold Dollar (USDKG) that is pegged to gold and the US dollar. At the same time, the government is promoting the "Digital Som" project to lay the foundation for a possible future issuance of central bank digital currency.

4. Summary and Outlook

Kyrgyzstan is actively promoting the development of the encryption industry by optimizing tax policies and improving regulatory systems, creating a stable and favorable business environment 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 hub, 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.