The National Bank of Kyrgyzstan has published draft legislation that would legally define cryptocurrency and how it may be used in the Central Asian nation.
With the proposed legislation, the central bank is following the call of the Financial Action Task Force (FATF) to regulate cryptocurrencies and prevent related money laundering and terrorism financing risks, according to an explanatory note.
With Kyrgyz citizens becoming increasingly interested in cryptocurrencies, and the technology gaining traction in electronic commerce worldwide, it's important to mitigate the risks associated with crypto, the National Bank wrote.
The regulator announced the proposed legislation on Dec. 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 good that represents value, is stored and used electronically and is neither a legal mean of payment nor a document representing any property rights. Virtual assets, however, are a different kind of asset and can represent property rights, another draft says, without going into detail.
Under the proposal, the property rights of cryptocurrency owners would be protected by the courts. Any companies and individual entrepreneurs, if they are not registered crypto operators or miners, should not accept crypto as payment for goods or services, as well as in a form of investment or savings deposit. Entities would not be able to offer crypto brokerage or issue securities based on cryptocurrencies.
Licensing and tax
Crypto exchanges, in turn, must register with and be licensed by the National Bank, and must keep a record of transactions they have facilitated – data that must be provided to the National Bank upon request. In the case of an "emergency," the regulator can request that exchanges take specific measures for "risk diminishing."
The taxation of crypto-related businesses should be carried out the same way as the foreign exchange brokerages, the National Bank wrote.
The regulator also says participants of the cryptocurrency market must make transactions with crypto "in good faith and on their own risk," learn how the cryptocurrencies of their choice function and abide by Kyrgyzstan's laws.
The regulator further underscores that it has no responsibility for the situation when cryptocurrencies lose their value and won't compensate such losses to crypto investors.
The draft bills have yet to be introduced to the Kyrgyzstan's parliament for discussion.