Why Is CZ So Interested in Kyrgyzstan? An Overview of the Country’s Crypto Tax and Regulatory System
- Introduction
Since Binance co-founder Changpeng Zhao (CZ) signed a memorandum of understanding with the Kyrgyz National Investment Agency in early April to collaborate on crypto and blockchain development, interactions between CZ and the Kyrgyz government have intensified. On May 5, CZ posted a photo of a Kyrgyz license plate reading “888BNB,” praising it online. Around the same time, the Kyrgyz President tweeted about meeting CZ and invited him to join the national crypto council. CZ, in turn, suggested that Kyrgyzstan include BNB and BTC in its national reserves. So, why is CZ so interested in Kyrgyzstan? What are the country’s policies on crypto taxation and regulation? This article offers a concise overview.
1.1 The Basic Information of Kyrgyzstan
The Kyrgyz Republic is located in northeastern Central Asia, acting as a geographic bridge between Western Europe and East Asia. Its capital is Bishkek. The official languages are Kyrgyz and Russian, and its currency is the Kyrgyzstani Som. In recent years, Kyrgyzstan has made notable progress in the crypto space, actively developing legal frameworks for digital assets and blockchain, positioning itself as a leader in crypto regulation and market growth in Central Asia.
1.2 Definition of Crypto Assets
Under Kyrgyzstan’s Virtual Assets Law, a virtual asset is defined as a set of data in digital form that has value and can be used to express value or certify ownership of assets or rights. It is created, stored, and transferred using distributed ledger technology or similar methods. It is not considered legal tender, a payment instrument, or a security. Crypto assets are a subset of virtual assets.
- Taxation Policies
2.1 Overview of the Tax System
Kyrgyzstan’s tax system is rooted in the legal traditions of former Soviet republics and shares similarities with Russia and other neighboring states. Its legal hierarchy includes constitutional laws, codes, general laws, and regulations. Over time, Kyrgyzstan has modernized its legal system, enacting laws across various sectors including tax, investment, trade, and civil law.
The Tax Code is the primary framework governing taxation. It outlines tax collection procedures and obligations. Major taxes include corporate income tax, personal income tax, VAT, sales tax, excise tax, natural resource taxes, property tax, and land tax. The system also supports special regimes such as simplified taxation, crypto mining tax, e-commerce tax, entertainment tax, special trade zone tax regimes, and high-tech park tax regimes.
Table 1. Key Taxes and Rates in Kyrgyzstan
| Tax Type | Tax Base | Rate |
| Corporate Income Tax | Net profit (revenue minus allowable deductions) | 10% |
| Individual Income Tax | Wages minus deductions | 10% |
| Value-Added Tax | Sales of goods/services or customs value of imports | 12% |
| Sales Tax | Sales revenue | 1% – 5% |
| Excise Tax | Depends on the type and volume of goods | Varies |
| Property Tax | Real estate and vehicles | Up to 0.8% |
Corporate Income Tax
1）Corporate tax resident. Corporate tax resident Entities and sole proprietors established and registered under Kyrgyz law are considered resident entities for tax purposes. This includes companies as well as non-corporate entities, institutions, and organizations. Partnerships are treated as transparent entities under Kyrgyz law—profits earned by a partnership are deemed to belong to the partners and are taxed at their level; the partnership itself is not subject to corporate income tax. Resident enterprises are subject to corporate income tax on their worldwide annual income. Enterprises operating within special economic zones often benefit from reduced tax burdens and liberal foreign exchange controls. However, depending on their location, such enterprises may also be subject to a special incentive fee ranging from 0.1% to 2% of their revenue. In addition, enterprises registered in designated high-tech
2）Non-corporate tax resident. These include legal entities established under foreign law and non-resident individuals required to register as sole proprietors in Kyrgyzstan. Non-resident enterprises fall into two categories:
-Those that maintain a permanent establishment in Kyrgyzstan;
-Those that do not have a permanent establishment but derive income from sources within Kyrgyzstan.
Non-resident enterprises are taxed only on their Kyrgyz-source income.
Individual Income Tax
1）Resident individual. Any individual who resides in Kyrgyzstan for 183 days or more within any 12-month period is considered a tax resident. Individuals performing official government duties abroad on behalf of Kyrgyzstan are also considered residents. Kyrgyz citizens and foreign nationals who are tax residents and hold permanent residency or a repatriate certificate are subject to personal income tax on their worldwide income. Individuals who meet the 183-day residency requirement but do not hold Kyrgyz citizenship and have not obtained permanent residency or a repatriate certificate are only taxed on their Kyrgyz-source income.
Sole proprietors are not subject to personal income tax—they are instead liable for corporate income tax.
2）Non-resident individual. Individuals who do not reside in Kyrgyzstan for at least 183 days within any 12-month period are classified as non-resident taxpayers. They are taxed only on income derived from Kyrgyzstan.
Value-Added Tax (VAT)
VAT liability arises for:
-Businesses and individuals selling taxable goods or services within Kyrgyzstan;
-Importers of taxable goods;
-Foreign companies providing services or digital services (including e-commerce) to Kyrgyz individual consumers.
Under the Tax Code, unless an exemption applies, all sales of taxable goods, services, or labor within Kyrgyzstan are subject to VAT. Imports of taxable goods are also subject to VAT, based on the customs value of the goods. The sale of crypto assets is not subject to VAT.
Special Tax Regimes
Free Economic Zones
Taxpayers registered in free economic zones are subject to a special FEZ regime. Except in certain specific cases, businesses under this regime are exempt from all taxes and only required to make social security contributions. The FEZ tax regime does not impose additional tax filing or payment obligations.
High-Tech Parks
Taxpayers registered in high-tech parks benefit from a dedicated regime under which they are exempt from corporate income tax, VAT, and sales tax. Obligations for other taxes still apply under the general tax framework. Like the FEZ regime, the high-tech park regime does not impose additional filing or tax compliance requirements.
In short words, Kyrgyzstan is actively working to improve its tax administration by simplifying tax structures, optimizing tax policy, and introducing digital tools. These reforms aim to create a more efficient, transparent, and fair tax system that supports economic growth and enhances overall compliance.
2.2 Crypto-Specific Tax Policies and Updates
Since August 1, 2020, Kyrgyzstan has imposed a specific tax on crypto mining businesses. According to the Tax Code, entities that mine using hardware/software are subject to a 15% mining tax, calculated based on electricity consumed (including VAT and sales tax).
Gains from the sale of crypto assets over cost basis, as well as the fair market value of gifted assets, are treated as taxable income at a 10% rate. Crypto-to-crypto swaps are not considered taxable sales.
Crypto asset sales are exempt from VAT, but may be subject to sales tax—2% for traders and producers, 3% for others. Under Islamic finance principles, tax is applied to gains (sale price minus cost) from sales of securities, currencies, crypto, and other assets.
In October 2024, the Ministry of Economy and Commerce began consulting on raising government fees for non-bank financial institutions (including crypto exchanges and miners) to increase state non-tax revenues and financial system stability.
- Crypto Regulation Developments
3.1 Regulatory Framework
In 2022, Kyrgyzstan enacted the Virtual Assets Law, establishing a foundation for regulating the issuance, storage, and circulation of crypto. The law introduced licensing for Virtual Asset Service Providers (VASPs), overseen by the Financial Market Supervision Authority. As of January 2025, 144 licenses had been issued: 8 to crypto trading operators, and 138 to crypto exchanges.
In January 2025, Resolution No. 823 introduced tighter requirements for VASPs, including:
1）Stricter requirements for crypto trading operators, such as mandatory customer identification and verification (KYC), publication of exchange rules, and checks on the reputation of beneficial owners. The use of unlicensed operators and high-privacy crypto wallets is prohibited. Crypto trading operators must meet a minimum authorized capital requirement of 2,000,000 computational units. 2）New obligations for crypto exchange operators, including verifying the reputation of beneficial owners, conducting annual audits, and notifying regulators of any corporate changes. The use of prepaid cards issued by foreign financial institutions is prohibited, as is the transfer of crypto assets to online gambling platforms or decentralized system addresses. The minimum authorized capital for exchange operators is set at 1,000,000 computational units. 3）Changes to crypto asset issuance rules, including the prohibition of private placements and the allowance for issuers to nominate foreign-denominated crypto assets.
Since the passage of the Virtual Assets Law in 2022, which established a clear legal framework for crypto-related activities, Kyrgyzstan has continued to advance its crypto policy by integrating digital banking technologies into its financial system and updating its digital payment regulations. These efforts signal the country’s openness and readiness to support the crypto industry.
In October 2024, the Ministry of Economy submitted a draft law to parliament proposing the establishment of crypto banks in Kyrgyzstan. The bill suggests amending current legislation to allow crypto banks—entities registered in Kyrgyzstan—to offer one or more crypto-related banking services under a license issued pursuant to the Law on Banks and Banking Activities. Once licensed, a crypto bank would be authorized to carry out any digital asset activities permitted under the law without requiring additional licenses. These banks would not need a separate banking license to operate as financial institutions.
The aim is to enhance user protection, reduce fraud risks, and prevent unauthorized access to funds. Crypto banks are also expected to become platforms for the deployment of smart contracts, decentralized finance (DeFi), and other emerging financial technologies—supporting the modernization of Kyrgyzstan’s financial system.
In February 2025, the Financial Market Supervision Authority under the Ministry of Economy and Commerce launched a public consultation to gather stakeholder input on proposed updates to the legal framework governing Virtual Asset Service Providers (VASPs). The proposed regulations aim to improve transparency, market safety, and investor protection. They would revise current regulatory requirements to reflect the evolving nature of the crypto market and promote the establishment of robust internal control systems for VASPs. These measures indicate Kyrgyzstan’s intent to introduce stricter crypto oversight and enhance compliance standards—especially in combating money laundering and terrorist financing, while improving operational efficiency.
3.2 Local Industry Developments
Kyrgyzstan has become the first country in Central Asia to establish a national crypto asset exchange, with the Ministry of Finance launching Coin National Exchange. The exchange was officially registered with the Ministry of Justice on December 30, 2024, and its core mandate is to manage activities related to the financial market. Existing platforms such as the Kyrgyz Stock Exchange, BTS Exchange, EVDE Universal Exchange, and several crypto trading platforms now fall under this category. According to documents from the Ministry of Finance, KGS 100 million from the national budget has been allocated as the exchange’s initial authorized capital.
In an effort to further consolidate its position as a regional hub for digital assets, Kyrgyzstan is actively supporting the development of stablecoins. In April 2025, a Kyrgyz company, Old Vector, issued a ruble-pegged stablecoin called A7A5, maintaining a 1:1 peg with the Russian ruble. The token was launched under Kyrgyzstan’s newly adopted crypto legislation and has received government support. According to the official white paper, reserve reports for A7A5 are updated weekly, and an independent auditor conducts quarterly external audits to ensure transparency and accountability. A7A5 generates revenue through interest income and automatically distributes 50% of the daily earnings to all token holders, who receive their share passively without needing to take any action.
In addition to A7A5, Kyrgyzstan previously introduced a gold- and dollar-backed stablecoin known as Gold Dollar (USDKG). Unlike most stablecoins, USDKG is pegged 1:1 to the U.S. dollar and backed by gold reserves provided by the Ministry of Finance. However, its development, auditing, and operational maintenance are handled by private entities. This initiative is expected to further strengthen the transparency and structure of Kyrgyzstan’s crypto ecosystem, support modernization of infrastructure, facilitate cross-border trade, and attract international investment.
In April 2025, the President of Kyrgyzstan signed legislation granting legal status to the Digital Som, paving the way for the possible issuance of a central bank digital currency (CBDC). If adopted, the Digital Som would become the country’s official legal tender.
4.Summary and Outlook
Kyrgyzstan has been actively promoting the development of its crypto industry, with a strong emphasis on refining its tax policies for digital assets. A clear tax framework and competitive rates have not only enhanced the country’s appeal in the global crypto asset market but also created a stable and favorable environment for investors and market participants. From recent regulatory reforms to frequent engagement with CZ, Kyrgyzstan has consistently demonstrated a friendly and open attitude toward the crypto sector.
Amid the rapid global expansion of the digital asset industry, we believe Kyrgyzstan’s evolving tax and regulatory systems will help it build a strong competitive edge in the crypto space. As crypto banks, a national exchange, and stablecoins continue to take shape, Kyrgyzstan is well positioned to integrate crypto assets with its traditional financial system—driving the development of innovative infrastructure and fueling the broader growth of the industry both domestically and across Central Asia.