The National Bank of Kyrgyzstan has released a draft law that would legally define the cryptocurrency and how it can be used in the Central Asian nation.
Kyrgyzstan also enters the world of cryptocurrencies with ad hoc legislation
With the proposed legislation, the central bank is following the Financial Action Task Force (FATF) call to regulate cryptocurrencies and prevent related risks of money laundering and terrorist financing, according to a statement.
With Kyrgyz citizens becoming increasingly interested in cryptocurrencies and associated technology gaining ground, it is important to mitigate the associated risks, the National Bank wrote.
The country's government announced the bill on December 31, 2020, publishing a package of drafts detailing why the new bill is needed and how it fits into Kyrgyzstan's existing regulation.
In one draft, cryptocurrency is defined as a digital asset that represents value, is stored and used electronically, and is neither a legal means of payment nor a document representing any property rights.
Virtual assets, however, are something different and can represent property rights, says another draft, without going into detail. According to the proposal, the property rights of cryptocurrency holders would be clearly protected by law.
Any companies and individual entrepreneurs, if they are not registered crypto traders or miners, should not accept crypto as payment for goods or services, as well as in the form of an investment or thrift deposit. The state currently would not be able to offer cryptocurrency brokerage or issue cryptocurrency-based securities.
Licenses and taxes
Cryptocurrency exchanges, in turn, must register and be authorized by the National Bank and must have a record of transactions - data which will have to be provided to the National Bank upon request.
In an "emergency", the regulator may require exchanges to take specific measures to "reduce risk". Taxation of cryptocurrency-related assets should be done in the same way as foreign exchange broking, the National Bank wrote.
The regulator also says that participants in the cryptocurrency market must transact with cryptocurrencies "in good faith and at their own risk", learn how the cryptocurrencies of their choice work and abide by the laws of Kyrgyzstan.
The regulator further stresses that it has no responsibility for the situation where cryptocurrencies lose their value and will not compensate for such losses for Investors in cryptocurrencies. The bills have yet to be submitted to the Kyrgyz parliament for discussion.
