Turkmenistan Moves to Legalize Cryptocurrencies with New Draft Law

Turkmenistan is on the brink of a significant shift in its digital asset sector with the introduction of the draft “On Virtual Assets” law, currently under consideration by its president. This legislation aims to legitimize cryptocurrencies by regulating their mining, trading, and fintech services, transitioning these activities from an unregulated state to a structured framework. The move is expected to attract foreign direct investment, potentially positioning Turkmenistan as the next blockchain hub in Central Asia. The country's goal is to diversify its energy-dependent economy through the regulation of digital assets, although success will hinge on overcoming challenges such as banking integration and infrastructure development.

Historically, Turkmenistan’s approach to digital assets has evolved rapidly. Before 2023, cryptocurrencies existed in a regulatory gray area with no formal framework. By early 2025, a draft bill describing the legal status of cryptocurrencies was in place, and by mid-2025, the proposal entered parliamentary scrutiny, with predictions of possible legalization by the end of 2025 or 2026. These developments reflect a global trend towards regulating cryptocurrencies and indicate Turkmenistan’s gradual shift from regulatory absence to governance mechanisms for the digital asset space.

The draft law, currently under parliamentary consideration, seeks to legalize virtual assets under state supervision. It includes provisions for the legalization and licensing of crypto mining operations, rules for public offerings and asset issuance, and requirements for exchanges and custody services. The Central Bank of Turkmenistan is expected to oversee compliance, with anti-money laundering and counter-terrorism financing measures aligning with international standards. Foreign currency restrictions may apply, such as the historical requirement for crypto purchases to be in USD.

The draft law specifies that a licensed mining framework will require prior government approval for mining activities on any land in the country, addressing energy consumption concerns. Policies are designed to attract large-scale miners, potentially leading to state-created joint ventures based on Turkmenistan’s energy resources. Virtual Asset Service Providers (VASPs) will be mandated to register locally, subject to strict oversight, while foreign platforms must establish local entities or partnerships to operate legally. This aligns with the government’s strategy for controlled fintech expansion.

Key implications of the draft law include a state-controlled crypto economy with licensing ensuring government oversight, an energy advantage due to cheap electricity attracting miners, and potential barriers to entry due to compliance costs limiting smaller players. Turkmenistan’s approach to crypto innovation focuses on state-driven action within the framework of crypto innovations, prioritizing blockchain in government public service applications. While there are no immediate plans for a central bank digital currency (CBDC), the country is building infrastructure for a regulated digital assets ecosystem. The virtual assets law aims to develop local crypto entrepreneurship and attract blockchain startups, signaling a balanced strategic intent to develop a digital economy within controlled but innovative environments.

Turkmenistan faces several challenges in regulating cryptocurrencies, including regulatory delays, limited fiat on/off ramps for cryptocurrency transactions, energy costs affecting mining profitability, and low public awareness of crypto adoption. These challenges highlight the complexities of creating a viable digital asset ecosystem in Turkmenistan’s economic and political environment. The draft law represents a step forward for the real economy, but these impediments may become more difficult with the process of formal legalization.

Looking ahead, Turkmenistan’s cryptocurrency landscape is poised for transformation. Parliamentary approval of the law could formalize crypto use by 2025-2026, with strict VASP rules potentially imposing high compliance burdens on exchanges. The country may follow the regulated crypto models of the UAE and Kazakhstan, with crypto mining becoming a state revenue source. The long-term implications of these regulations will determine whether Turkmenistan becomes a tightly controlled digital asset market serving state interests, a competitive regional player in blockchain innovation, or a cautionary tale of over-regulated stagnation. The next 12-18 months will be crucial in shaping the future of crypto in Turkmenistan.

In conclusion, Turkmenistan’s draft crypto law marks a pivotal step toward regulated digital asset adoption. While challenges remain, this balanced framework of regulations could position the country as the next blockchain hub in Central Asia. Successful implementation may unlock the growth potential of the sector, currently valued at $2.7 million, blending innovation with financial oversight. The future of crypto in Turkmenistan will depend on overcoming regulatory, banking, and infrastructure challenges, but the potential for economic diversification and innovation is significant.