For a relatively new technology, blockchain has become a beacon of hope for many developing nations that are welcoming it to upgrade their financial infrastructure. The latest entrant to that group is the Central Asian country, Uzbekistan. The government of Uzbekistan is inviting interested enterprises dealing with cryptocurrency exchanges to set up shop within the nation. With an economic freedom score of 51.5, that makes its economy the 152nd freest in the world (2018 Index), there is ample scope of improvement there.
Giving way to cryptocurrency, and an immutable, transparent decentralized digital ledger to trade it on, is indicative of the new government’s efforts to balance Uzbekistan’s history of protectionism, and government intervention in matters of the economy. The advent of cryptocurrency exchanges and ICOs would make the current economy more liquid, giving rise to a whole new crop of blockchain startups, reduce remittance costs, and speed up business processes with its swift pre-programmed automation.
Trade (exports and imports) contribute 42 percent of Uzbekistan’s GDP, and their government could implement blockchain to increase the traceability of goods in the supply chain, reducing chances of misplacing valuable items. Blockchain would reduce operation costs, and quicken the process of transporting goods from warehouse to retailer/final customer by eliminating the need for paperwork, middlemen, and various stop points, by generating automated receipts and smart contracts.
A blockchain based registry for the supply chain will be a game changer for the mining industry of the country which relies on exports of natural gas, gold, refined copper, and cotton.
Uzbekistan has reported high rates of corruption, and bringing in a digital, decentralized, automated innovation to regulate and verify money transactions, store and generate legal documentations, and serve as a secure, impenetrable safe for virtual money, could change that.
Uzbekistan’s economy is largely controlled by the government, but the need to improve the investment climate has been recognized by it. Their recent measures to reform the business sector include floating the exchange rate, offers of financing and tax advantages to foreign investors, and removal of some capital controls. Software development companies are viewing this as a great opportunity to take business to this part of the continent. California based blockchain company, Hashcash, is one of the first firms to show an interest in this new market, and are planning to introduce their well acclaimed white label line of products – mainly cryptocurrency exchanges – to facilitate the quick set up of new companies.
Additional provisions declared by president Shavkat Mirziyoev to encourage the inclusion of cryptocurrency exchanges are exemption from tax of cryptocurrency-related income, licensed exchanges running operations with cryptocurrencies and foreign fiat currencies will not be subject to existing foreign currency regulations and neither will they be subject to the country’s securities and exchanges regulations.