The Besqala Mining Valley in Karakalpakstan will exempt operators from corporate and property tax until 2035, but requires all sale proceeds to be repatriated through Uzbekistan's domestic banking system.
Uzbekistan's president signed a decree on 17 April establishing the Besqala Mining Valley, a dedicated crypto mining zone in the Republic of Karakalpakstan that exempts operators from corporate income tax and property tax until January 2035.
The decree, which took effect on 20 April, creates an unusual hybrid: state-sponsored mining with capital controls. Miners operating inside the zone can sell mined assets on foreign platforms and keep revenues in cryptocurrency, but sale proceeds must be repatriated through domestic banks. It's an invitation to dig for bitcoin, paired with a requirement that the resulting wealth flows through institutions the government can monitor.
Instead of conventional taxation, zone residents will pay a flat monthly fee equal to 1 per cent of mining revenue to a directorate newly established under Karakalpakstan's Council of Ministers. That directorate also controls admission — only registered legal entities can operate inside the valley — giving the government a chokepoint over who mines and how much they produce.
The energy provisions represent a notable shift from Uzbekistan's previous stance. In 2023, the National Agency for Perspective Projects required licensed miners to use only solar power, a restriction that effectively capped the industry's scale. Under the new decree, zone residents can draw from a broader mix: renewables, hydrogen, and grid electricity. Miners using grid power will face higher tariffs, a concession to the reality that Karakalpakstan's electrical infrastructure was not built to absorb the sustained base loads that industrial mining demands.
The government is targeting more than $1 billion in foreign investment by 2030, an ambitious figure for a region that ranks among Uzbekistan's poorest. Karakalpakstan — an autonomous republic bordering the shrinking Aral Sea — has limited industrial development and high unemployment. The mining valley is being positioned as economic stimulus as much as a technology initiative; the decree ties the zone to job creation goals, though it doesn't specify how many positions the government expects to materialise.
The timing carries its own logic. Bitcoin mining economics have deteriorated sharply in recent quarters, with hash price at a five-year low and difficulty at record levels compressing margins across the board. Operators squeezed by rising costs and stagnant coin prices are hunting for jurisdictions that offer cheap power and favourable tax treatment. Uzbekistan's pitch — zero corporate tax for nine years, flexible energy sourcing, and a government eager to attract foreign capital — is designed to intercept exactly that search.
But the capital controls complicate the proposition. Requiring repatriation through domestic banks means miners cannot simply stack bitcoin in cold storage or route revenues through offshore entities, a practice common among internationally mobile operations. For firms accustomed to the jurisdictional arbitrage that defines much of the industry, the requirement introduces friction — and a dependency on Uzbekistan's banking system, which is not known for speed or sophistication in handling digital asset flows.
The decree also leaves open what happens after the holiday expires. A nine-year exemption is generous, but mining hardware depreciates over three to five years, and firms planning investments on a longer horizon will want clarity on the post-2035 regime before committing serious capital. The 1 per cent monthly revenue fee establishes the principle that the state intends to take a cut; whether that cut grows is a commercial risk each prospective resident will have to price in.
Kazakhstan's experience offers a cautionary parallel. The country attracted a surge of mining investment after China's 2021 crackdown, then imposed escalating electricity surcharges and licensing requirements that drove many operators out within two years. Uzbekistan's decree reads as though its authors studied that playbook — the energy flexibility and long tax horizon suggest they want to avoid spooking capital with abrupt policy changes.
For now, Besqala Mining Valley exists on paper. No operators have publicly announced plans to set up inside the zone, and the directorate that will govern it is still being constituted. The government is offering generous terms to an industry built on the premise that nobody needs to ask permission. The tension between those two instincts will determine whether the valley attracts the capital Tashkent is counting on, or becomes another empty zone with a presidential decree and not much else.
