Uzbekistan -- Custody Regulations Regulatory Overview

Uzbekistan has been a pioneer in the Central Asian region for establishing a regulatory framework for virtual assets. The National Agency for Prospective Projects (NAPP) under the President of the Republic of Uzbekistan is the primary regulator for the virtual asset market.

The core regulatory framework for digital asset custody in Uzbekistan is primarily based on:

1. Presidential Decree No. UP-106 "On measures for further development of the digital economy in the Republic of Uzbekistan" dated March 16, 2022. This decree established NAPP as the regulator and laid out the general principles.
2. Resolution of the Cabinet of Ministers No. 445 "On approval of the Regulation on the procedure for licensing the activities of service providers in the field of circulation of crypto-assets" dated August 22, 2022. This is the most critical document detailing licensing and operational requirements.
3. Law "On the Regulation of Virtual Asset Turnover" (currently under development or recent enactment, as NAPP continuously refines the framework).

Here's a breakdown of the custody regulations:

Cryptocurrency/Digital Asset Custody Regulations in Uzbekistan

1. Custodial License Requirements

To offer digital asset custody services in Uzbekistan, entities must obtain a Virtual Asset Service Provider (VASP) license from the National Agency for Prospective Projects (NAPP). The Regulation approved by Cabinet of Ministers Resolution No. 445 outlines the detailed requirements:

• Legal Entity Status: The applicant must be a legal entity registered in the Republic of Uzbekistan.
• Authorized Capital: Compliance with the minimum authorized capital requirements as stipulated by NAPP (e.g., for crypto exchanges, it's often set at a significant amount in USD equivalent, which usually applies to other VASPs like custodians as well).
• AML/CFT Compliance: Strict adherence to international Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) standards, including FATF recommendations. This involves:
  • Developing and implementing internal AML/CFT policies and procedures.
  • Conducting Know Your Customer (KYC) for all clients.
  • Monitoring transactions for suspicious activities.
  • Reporting suspicious transactions to NAPP and other relevant authorities.
• IT Security: Implementation of robust information security systems, including:
  • Obtaining an information security certificate (e.g., ISO 27001).
  • Conducting regular penetration testing and security audits.
  • Ensuring the reliability and uninterrupted operation of software and hardware.
  • Compliance with NAPP's specific technical requirements for data storage and processing.
• Data Storage: All information related to virtual asset turnover and client data must be stored on servers located within the territory of the Republic of Uzbekistan.
• Integration with NAPP Systems: Service providers must integrate their information systems with NAPP's unified information system for monitoring and supervision.
• Qualified Personnel: Directors and key personnel must meet qualification requirements, including relevant experience and a clean criminal record.
• Internal Control System: Establishment of an effective internal control system to manage operational risks.
• Clear Rules: Development of clear and transparent rules for interaction with clients, including terms of service, fee structures, and complaint resolution procedures.

2. Segregation of Client Assets Rules

Yes, explicit segregation of client assets is mandated.

The Regulation (RCM No. 445) clearly states that licensed virtual asset service providers, including custodians, must maintain separate accounts for client virtual assets and their own operational assets. This is a fundamental principle to protect client funds in case of the service provider's insolvency or other financial difficulties.

3. Insurance/Bonding Requirements

As of the current public regulations, there is no explicit mandate for mandatory insurance or bonding for digital asset custodians in Uzbekistan in the same way, for example, the US requires it for certain money transmitters.

However, the robust requirements for minimum authorized capital, stringent IT security, internal controls, and the financial stability demanded by NAPP implicitly serve to protect client assets. The emphasis is more on robust operational and financial resilience rather than external insurance policies.

4. Cold Storage Mandates

Uzbekistan's regulations emphasize general requirements for secure storage and information security rather than explicitly mandating "cold storage" for a specific percentage of assets.

The NAPP regulations require service providers to implement "technical and software complexes that ensure the reliability, integrity, and safety of information," and to comply with high standards of information security. While not explicitly naming "cold storage," meeting these stringent security requirements for safeguarding digital assets would naturally lead responsible custodians to utilize a combination of secure storage methods, including cold storage for a significant portion of client assets, as it is considered a best practice in the industry.

5. Qualified Custodian Definitions

Uzbekistan does not use the exact term "Qualified Custodian" in the same manner as, for example, the U.S. Securities and Exchange Commission (SEC). Instead, an entity that can legally provide digital asset custody services and is considered "qualified" in Uzbekistan is a Virtual Asset Service Provider (VASP) that has obtained the necessary license from the National Agency for Prospective Projects (NAPP) and fully complies with all the requirements outlined in Cabinet of Ministers Resolution No. 445.

Essentially, a "qualified custodian" in the Uzbek context is synonymous with a licensed VASP authorized to perform custody functions, meeting all the stringent capital, AML/CFT, IT security, data storage, and operational requirements set by NAPP.

6. Pending Custody Legislation

The regulatory framework for virtual assets in Uzbekistan is relatively new and continuously evolving. NAPP is actively involved in monitoring the market and introducing amendments or new regulations as needed.

• Ongoing Refinement: NAPP regularly issues clarifications, guidance, and proposes amendments to existing acts. It is advisable to consult NAPP's official resources for the most up-to-date information.
• Law "On the Regulation of Virtual Asset Turnover": While Decree UP-106 and RCM 445 are foundational, a comprehensive law specifically titled "On the Regulation of Virtual Asset Turnover" has been under development or recently adopted to provide a higher-level legal basis for the entire industry. This law could further detail aspects of custody.
• FATF Standards: Uzbekistan, as a member of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), is committed to implementing FATF standards. Future legislative changes are likely to reflect ongoing updates to FATF guidance on virtual assets, which may impact custody requirements, particularly regarding travel rule implementation and risk assessments.

Specific Regulatory References with URLs

1. National Agency for Prospective Projects (NAPP) Official Website:

   • This is the primary source for all official announcements, regulations, and updates.
   • URL: https://napp.uz/en/ (English version)
   • Note: Specific laws and regulations might be more readily available in Uzbek or Russian on the official NAPP site or through official legal databases like Lex.uz.

2. Presidential Decree No. UP-106 of March 16, 2022:

   • You might find summaries or references to this decree on NAPP's news section or legal news sites.
   • Direct official link in English is challenging to find, but it's universally referenced.
   • Reference Title: "On measures for further development of the digital economy in the Republic of Uzbekistan."

3. Resolution of the Cabinet of Ministers No. 445 of August 22, 2022:

   • This is the key document for licensing.
   • Reference Title: "On approval of the Regulation on the procedure for licensing the activities of service providers in the field of circulation of crypto-assets."
   • While a direct English government link might be unavailable, legal firms frequently summarize it.
   • Example of a legal summary referencing it: https://lexology.com/library/detail.aspx?g=e46d0a7a-62bb-41d1-8d2a-c7528e1088d8 (Note: This is a third-party legal summary, not the official text, but useful for reference.)

It is highly recommended for any entity considering providing crypto custody services in Uzbekistan to engage with local legal counsel specializing in virtual asset regulation and to directly consult the NAPP for the most current and specific requirements.