Uzbekistan restricts access to digital asset exchanges—Binance, FTX affected

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Uzbekistan is strengthening its implementation of digital asset legislation and oversight. As the citizens of the country swarmed to the asset class, the wave of adoption has attracted several exchanges. According to the Uzbekistan government, most of these exchanges reportedly bypassed requisites for proper licensing. The authorities have hence recently restricted access to such entities, which include certain notable exchanges, such as Binance.

In a recent press release, the National Agency of Perspective Projects (NAPP) of Uzbekistan addressed the current state of the digital assets industry in the country. The agency highlighted the surge of exchanges, but mentioned that most of them never obtained proper licensing.

NAPP noted that the mass patronage of these exchanges by Uzbek citizens has become concerning. This has led to the recent wave of mass restrictions by the country’s watchdog.

Uzbekistan officially began digital asset regulation in 2018, following the legalization of digital asset trading. President of Uzbekistan, Shavkat Mirziyoyev, on July 3, 2018, signed a Decree addressing digital asset-related activities within the country. With the Decree No. RP-3832, the government aims to “develop the digital economy and the sphere of crypto-assets turnover.”

The decree recognizes digital assets-related activities such as mining and operations of service providers within the space. Furthermore, according to the act, residents of the country are permitted to carry out digital asset-related activities on exchanges that had procured licenses from January 1, 2023.

NAPP, however, highlighted that this does not grant citizens the right to carry out these activities on unlicensed exchanges before January 1, 2023. Notwithstanding, NAPP mentioned that it had recently witnessed the surge of digital asset-related activities on these unlicensed exchanges.

This led to the restrictions. NAPP said it hadn’t implemented the act due to consideration for citizens’ convenience. Apparently, most citizens already have funds in these exchanges, and implementation would be to their inconvenience.

Binance, FTX, and Huobi appear to have been restricted

NAPP has intensified the implementation nonetheless. Binance, the world’s largest exchange, confirmed that customers in Uzbekistan could no longer access the platform. This was revealed by Gleb Kostarev, Head of Eastern Europe at Binance.

The exchange noted that it had begun negotiations with the Uzbek authorities to resolve the matter. Additionally, other exchanges such as Bybit, FTX, and Huobi are confirmed to be restricted as well.

At the time of reporting, Uzbekistan has licensed only one known digital asset exchange: South Korea’s UZNEX. Exchanges looking to be licensed would have to fulfill the requirements of licensing. These requirements include Uzbekistan’s data repository guidelines. 

Apparently, service providers are required to process and store users’ information on a database accessible to the Uzbekistan government. Providers are to process data only on means “physically located on the territory of Uzbekistan.” The method used should also be registered with the Uzbekistan authorities.

Conclusively, NAPP mentioned that global exchanges looking to set up shop within the country are welcome. However, they should endeavor to follow due process in obtaining operational licenses.

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Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for (and even experienced) players in the market.