The Korean Blockchain Business Association (KOBEA) and the government of Uzbekistan have signed a memorandum of understanding (MoU) to establish the country’s first government-licensed crypto exchange.
The National Agency of Project Management (NAPM) under the president of the Republic of Uzbekistan settled a direct partnership with KOBEA to facilitate the growth of the country’s cryptocurrency and blockchain sector.
In the years to come, the government of Uzbekistan will contribute to the establishment of a large-scale fund to finance innovative startups and projects in the technology, cryptocurrency, and blockchain industries.
Motivation Behind the Decision
In 2012, Uzbekistan was officially delisted as a Specially Designated Global Terrorist under Executive Order 13224, which has allowed individuals and businesses in the US to engage in financial transactions with companies and financial institutions in Uzbekistan.
Throughout 2018, countries like Iran and Turkey have seen a rapid increase in demand for cryptocurrencies due to the tightening of sanctions imposed by the US government and the devaluation of their national currencies.
However, given the absence of sanctions by both the US government and the EU in the region, it is evident the decision of Uzbekistan to open its economy for crypto and blockchain related ventures has no association with its relationship with the US and the current financial state of the country.
Rather, as Uzbekistan government officials from NAPM noted, the government has come to consensus to develop and create a friendly ecosystem for crypto startups after evaluating the success of Malta and Switzerland’s Zug in luring blockchain-related businesses with practical regulatory frameworks.
Malta, a country within the EU characterized as ‘the blockchain island’, has recently seen three multi-billion dollar corporations relocate their headquarters to Malta due to its favorable cryptocurrency policies.
Revolut and Binance have permanently established new headquarters in Malta, bringing in hundreds of employees and hundreds of millions of dollars in monthly profits into the region. Tron, a major blockchain project, is expected to migrate to Malta in the upcoming months.
To compete against Malta, South Korea’s Busan, Jeju Island, Switzerland, and other major crypto markets, the government of Uzbekistan has said that it will establish large-scale research and development centers, mining town in Chorvoq, and efficient banking relations for cryptocurrency exchanges.
Will Favorable Crypto Policies be Enough?
The Philippines, South Korea, Malta, Switzerland, Singapore, Thailand, and many countries in Europe have already introduced cryptocurrency-friendly policies to accommodate blockchain startups.
Merely imposing practical regulatory frameworks will not be sufficient to convince companies that are based in regions with vibrant crypto communities.
But, the optimistic stance of the government towards various sectors of the cryptocurrency market including initial coin offerings(ICOs), mining, trading, and development will likely lead large-scale startups in the space to consider establishing offices in Uzbekistan as a secondary option.
As seen in the case of Malta, the process of the crypto industry of Uzbekistan evolving into the size of its competitors in Asia and Europe could take many months to years. Depending on the government’s efforts and commitment, the recent project deployed by NAPM could allow the country to be recognized as an emerging technology hub in Central Asia.