Turkmenistan Legalizes Crypto with State Control, Testing Balance Between Regulation and Decentralization

Turkmenistan has taken a decisive step into the digital age by legalizing cryptocurrency trading under a tightly controlled regulatory framework, effective January 1, 2026. The new law, signed by President Serdar Berdimuhamedov, marks a significant policy shift for the Central Asian nation, historically known for its closed economy and strict state oversight. The legislation mandates licensing, Know-Your-Client (KYC), Anti-Money Laundering (AML) checks, and cold storage requirements for crypto exchanges and custodial services, while prohibiting traditional banks from offering crypto-related services. The central bank retains broad authority to authorize distributed ledgers or operate its own, potentially channeling crypto activity through state-managed infrastructure .

Under the law, cryptocurrencies are not recognized as legal tender but are categorized into "backed" and "unbacked" assets. Regulators will define liquidity and redemption conditions for backed assets, while unbacked tokens may face restrictions to protect financial stability . Mining operations and mining pools must register with the central bank, and covert activities are banned. Miners are required to store coins in approved cold wallets, with penalties for noncompliance . The state also retains the power to void token issuances or mandate refunds, emphasizing centralized control over the sector according to analysis.

The reform aims to modernize Turkmenistan's economy, attract formal crypto investment, and diversify its gas-dependent revenue streams. By establishing a clear legal framework, the government hopes to foster transparency and reduce illicit activity, aligning with global trends in crypto regulation. The law follows a November 21 government meeting that outlined the legal, technological, and organizational foundations for digital assets, accompanied by a proposal to create a State Commission to oversee the industry .

Turkmenistan's move reflects a broader international push to regulate digital assets. Countries like the United Kingdom and South Korea have introduced measures to integrate crypto into traditional financial systems, including tax deferrals for DeFi users and expanded AML requirements according to recent reports. However, Turkmenistan's approach is notable for its centralized control, raising questions about the balance between regulation and decentralization. Analysts suggest that while strict oversight may curb innovation in decentralized finance, it could also enhance security and consumer protection .

The law's implementation will test Turkmenistan's ability to reconcile its authoritarian governance with the inherently borderless nature of crypto. As the country positions itself as a regulated hub for digital assets, the outcomes will likely influence regional adoption and global regulatory strategies.