UzNEX Struggles to Attract New Clients

While waiting for changes in legislation

The only crypto exchange in the entire Central Asian region UzNEX has been recruiting enthusiasts, who it hopes can help the entity attract new clients. In turn, the exchange is ready to pay three USDT for each new client. However, the current activity on the exchange is quite low. 

UzNEX’s work in Uzbekistan is absolutely legal; it got a license in 2019 when the Uzbekistani government approved the corresponding law.

The document regulates how crypto-assets should be traded – in Uzbekistan only foreigners are allowed to buy a cryptocurrency while Uzbekistan can sell it. Moreover, there is no way to make a withdrawal of USD or som (Uzbekistan’s national currency) from the exchange. Given all these difficulties, it is no easy task to attract new clients to UzNEX.

Awaiting crypto changes 

The cryptocurrency industry in Uzbekistan is regulated by the National Project Management Agency (NPMA), which issues licenses for crypto exchange operations. Only foreign subsidiaries in the country can obtain such a document. This is exactly what Kobea Group from South Korea did. It obtained a license, established and ran UzNEX. Currently, the exchange trades with the following cryptocurrency pairs: BTC/USDT, ETH/USDT, BTC/USD, ETH/USD, ETH/BTC. According to Sarvar Khaydarov, UzNEX manager, they are going to add some new cryptocurrencies to the listing.

UzNEX hopes that Uzbek citizens will also get the right to buy cryptocurrency due to a draft law developed by the NPMA at the end of April 2021. Once approved, it will allow Uzbekistanis to participate in all kinds of deals with cryptocurrency. 

The crypto exchange waits for the adoption of the new law to start converting cryptocurrency into fiat money and set a procedure for fiat money withdrawal. Currently, these types of operations are prohibited and prosecuted by law enforcement. For example, two Uzbek citizens, the buyer and seller involved in a deal with bitcoins, now face criminal charges. 

Mining domestically 

One more draft law in the crypto field covers mining issues and aims to promote industrial mining with a special electricity tariff. Even though this draft law has been discussed for one year, it is still just a draft. According to official information, there is no industrial mining site in Uzbekistan (with energy consumption above 100 kWh) because it would require a special parcel of land approved by Uzbekenergo, Uzbekgidroenergo and NPMA. 

“We do collect data on all mining farms in the country and so far haven’t received any applications for industrial mining operations,” the regulator told the Kursiv edition. 

As Sanzharbek Nasirbekov from Ransif Group consulting company notes, the vast majority of mining farm owners are individuals who do not want to tout themselves. The reason is simple: money. On December 9, 2019, the Uzbekistani government issued a rule that requires those who are involved in mining to pay a higher price for electricity. That is why they have refused to advertise their activity.

However, the logic of Uzbek authorities is clear. The country suffers from a deficit of electricity: last year Uzbekistan generated 66.4 billion kWh while energy consumption was about 69.1 billion kWh. So, Uzbekistan was forced to buy the rest of the electricity from neighboring countries. 

As Nasirbekov noted, to make progress in the crypto industry Uzbekistan has to develop a market for private power stations, which will be able to sell electricity to mining farms. So far, Uzbekistan accounts for just 0.003% of the international bitcoin mining market. For comparison, Kazakhstan accounts for 8.2% of the market and China – 46%, according to Cambridge University.

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