Transformation of highly regulated countries: Turkmenistan legalizes crypto mining and trading but bans it as a means of payment

Turkmenistan President Serdar Berdimuhamedov has just signed a decree officially legalizing cryptocurrency mining and trading. This move represents a significant shift in economic policy for this Central Asian country, which is highly dependent on natural gas exports and has strict internet regulations. However, it is important to note that while the decree opens up mining and trading, it also sets clear restrictions.

Core Content of the Policy

This new legislation does three key things:

Legal status of virtual assets

Officially incorporates virtual assets into civil law, providing a clear legal definition for cryptocurrencies. This means that holding and trading crypto assets now have legal protections, no longer being in a gray area.

Establishment of a regulatory framework

Cryptocurrency exchanges will be regulated by the Central Bank of Turkmenistan under a licensing system. This indicates that the government is not laissez-faire but has chosen a “regulated legalization” approach, requiring exchanges to obtain licenses to operate.

Clear prohibition clauses

Although mining and trading are legalized, digital currencies are still not considered as a means of payment, legal tender, or securities in Turkmenistan. This means you can mine and trade, but cannot use cryptocurrencies to buy goods or pay bills.

Background Behind the Policy

Turkmenistan is a unique economy. As one of the countries with the largest natural gas reserves in the world, its economy is highly reliant on energy exports. In recent years, fluctuations in international oil and gas prices and geopolitical changes have put pressure on the country’s foreign exchange earnings.

At the same time, Turkmenistan’s internet has been strictly regulated by the government. Against this backdrop, the sudden legalization of cryptocurrency mining and trading is somewhat surprising. But from an economic perspective, it may be an attempt by the government to diversify the economy.

What This Means

In practical terms, this policy could bring about several changes:

• Attractiveness to Miners: If Turkmenistan’s electricity costs are competitive (electricity is generally cheap in Central Asia), legalization may attract some mining operators.
• Impact on Local Trading Markets: A legitimate exchange framework could promote the development of the local crypto market.
• Foreign Exchange Benefits: If miners or traders generate income in USD or other foreign currencies, it could potentially help Turkmenistan’s foreign exchange reserves.
• Limited Payment Functionality: Prohibiting cryptocurrencies as a means of payment means limited penetration of crypto in daily economic activities.

Personal Observations

The most interesting aspect of this policy is its “selectivity.” Turkmenistan has not fully embraced cryptocurrencies but has precisely allowed the mining and trading segments that generate economic value while blocking the payment function. This indicates that the government is balancing two objectives: one, to benefit from the crypto economy; and two, to maintain control over monetary policy and the financial system.

In highly regulated countries, this kind of “partial openness” is quite common. Governments want to profit from emerging industries without losing control over the economy.

Summary

Turkmenistan’s decree sends a clear signal: Central Asian countries are re-evaluating the economic value of cryptocurrencies. While it is not a full embrace, the legalization of mining and trading is indeed a significant shift. For miners, this could mean a new potential market; for Turkmenistan, it may be a small step toward economic diversification. The key questions are whether this policy can truly attract investment and whether the Central Bank’s regulatory framework can operate effectively.