Kyrgyzstan's 10 Billion KGS Capital Rule Attracts 120 Licensed Crypto Firms

Kyrgyzstan has established itself as a leading jurisdiction for cryptocurrency regulation in Central Asia. The Law on Virtual Assets, which came into effect in mid-2022, provides clear guidelines for those interested in exchanging, mining, or issuing digital coins. Companies that meet the regulatory standards can commence operations within weeks, while non-compliant operators face imminent closure. The stringent regulations, including a high capital requirement and rigorous anti-money-laundering (AML) checks, aim to attract serious investors while deterring fraudulent activities.

The National Bank of Kyrgyzstan first issued warnings about the risks associated with Bitcoin in 2014. By 2018, the bank's governor acknowledged that a complete ban on cryptocurrencies was impractical due to the decentralized nature of digital currencies. In response, lawmakers shifted their approach from caution to competition, drafting comprehensive regulations to rival neighboring Kazakhstan's burgeoning crypto industry. The 2022 law formalized the licensing process and expelled hundreds of shell companies that had previously operated under looser regulations.

The regulatory framework in Kyrgyzstan is overseen by the Agency for the Development of Information Technologies and Communications (ADITC), which issues licenses, and the State Service for Financial-Market Supervision, which enforces AML regulations. There are three types of licenses: trading operator (full exchange), currency exchanger, and mining operator. All license holders must undergo annual audits and submit AML reports. The capital requirements are substantial, with exchanges needing to maintain 10 billion KGS (approximately US$114 million) in a Kyrgyz bank and currency exchangers requiring 40 million KGS (approximately US$460,000). Additionally, the Travel Rule mandates that Virtual Asset Service Providers (VASPs) must attach sender and receiver data to every transfer exceeding 85,000 KGS (approximately US$1,000).

Kyrgyzstan allows citizens and companies to own or trade any cryptocurrency, but only the paper som is recognized as legal tender. Crypto cannot be used to settle everyday bills. Exchanges serving local users must be licensed in Kyrgyzstan; foreign platforms without a domestic permit risk having their orders blocked. Mining remains legal and popular due to the abundant hydropower that keeps electricity costs low. Large mining farms must register as "mining operators," pay a 10% power tax, and ensure safe grid connections.

In April 2025, President Sadyr Japarov signed amendments granting the upcoming digital som the same legal status as cash. The National Bank plans to test this central bank digital currency on a closed platform during 2025 and will decide on a full launch by late 2026 based on the test results. Additionally, Kyrgyzstan has appointed Binance founder Changpeng Zhao as a blockchain adviser to assist in policy design, training program construction, and technical standards proposal for a national crypto reserve.

Despite the progressive regulatory environment, Kyrgyzstan faces several challenges. The high entry cost, with a 10 billion KGS capital floor, favors large international exchanges over start-ups. Local banks remain hesitant to work with new crypto firms, forcing some businesses to rely on slower payment processors. The regulatory landscape is also subject to frequent changes, with new reporting requirements for OTC trades and derivatives becoming mandatory in September 2025. Furthermore, the aging Soviet-era dams that supply cheap power need upgrades to handle large mining loads safely.

The government has confirmed that the 10 billion KGS capital rule will remain in place, citing its role in enhancing investor trust. By late 2024, over 120 licensed VASPs were active, and turnover is increasing as regional traders seek regulated venues. Officials hope that the digital som pilot and the expertise of Changpeng Zhao will strengthen Kyrgyzstan's profile and attract further foreign direct investment, particularly for mining projects linked to new hydropower plants.

In conclusion, Kyrgyzstan presents a unique blend of openness and strict control in its approach to cryptocurrency regulation. The country is attractive to well-financed crypto projects due to its straightforward licensing process, affordable renewable energy, and state-sponsored digital currency. However, the high capital requirements, bank hesitancy, and frequent regulatory changes pose significant barriers, ensuring that only well-capitalized and diligent players can succeed.