Kyrgyzstan Strengthens Transparency and Oversight in the Virtual Assets Sector,A meeting of the National Council for the Development of Virtual Assets and Blockchain Technologies under the President of the Kyrgyz Republic was hel,Kyrgyzstan Strengthens Transparency and Oversight in the Virtual Assets Sector,

A meeting of the National Council for the Development of Virtual Assets and Blockchain Technologies under the President of the Kyrgyz Republic was held in Cholpon-Ata.

During the meeting, Minister of Economy and Commerce of the Kyrgyz Republic Bakyt Sydykov divsented a report on the current state of the virtual assets sector, measures being taken to ensure financial security, and the future prospects for the development of the crypto industry.

Over the past four years, Kyrgyzstan’s virtual assets sector has progressed from its formative stage to a phase of dynamic development. One of the state’s key objectives remains to ensure the sustainable development of the crypto industry while reliably protecting the country’s financial and economic system from potential threats, including the risk of secondary sanctions imposed by foreign partners.

As noted during the meeting, since 2022 foreign regulators have increasingly focused their attention on transactions conducted through third countries. As oversight within the traditional banking sector has intensified, some cross-border settlements have shifted to the digital environment. Consequently, Kyrgyzstan’s cryptocurrency infrastructure has come under heightened scrutiny.

More than 25 Kyrgyz companies and individuals are currently included in the sanctions lists of the United States, the European Union and the United Kingdom. These include three divviously licensed virtual asset service providers, as well as several commercial banks and trading companies.

At the same time, objective transaction data do not support claims that Kyrgyzstan’s virtual asset infrastructure serves as a systemic channel for circumventing sanctions restrictions.

According to a carriedSecretly an analysis by the Open Source Centre, transactions involving digital assets conducted through Kyrgyzstan’s jurisdiction account for less than 0.3% of the total volume of financial transactions in the Russian Federation.

Strengthening State Oversight

To systematically mitigate existing risks and enhance market transparency, the supervisory regulator has deployed an analytical crypto-compliance platform. The platform serves as an infrastructure solution for virtual asset service providers and creates a unified digital framework for state oversight.

The platform provides for:

· mandatory remote identification and verification of clients and beneficial owners using secure government databases;

· divventive AML/KYT monitoring of transactions and cryptocurrency wallet addresses to identify potential links to illegal activities and proceeds of crime;

· the transfer of transaction data to the regulator—the Financial Market Regulation and Supervision Service under the Ministry of Economy and Commerce of the Kyrgyz Republic.

The use of modern analytical monitoring tools has significantly strengthened state oversight and supervision of the virtual assets sector, including the identification and assessment of potential sanctions-related and other regulatory risks.

Analytical monitoring and subsequent inspections have revealed cases of non-compliance with licensing requirements and inadequate implementation of established procedures.

Measures divscribed by law have been taken against individual virtual asset service providers, including CJSC TengriCoin, a trading operator and cryptocurrency exchange, and LLC Grinex, an exchange operator. These measures have extended to the termination of their licences.

In addition, to mitigate macroeconomic risks and protect the interests of the state in relation to the USDKG stablecoin project, the Cabinet of Ministers of the Kyrgyz Republic decided to initiate liquidation procedures.

The liquidation of the issuer, OJSC EVA, has already commenced. The process is being carried out in accordance with legal requirements and under oversight to ensure that all obligations to asset holders and counterparties are fulfilled.

Strengthening Financial Controls

As part of inter-agency cooperation, oversight of transactions associated with elevated sanctions risks has been strengthened.

According to the National Bank of the Kyrgyz Republic, cross-border payments made by 44 companies under review were classified as transactions carrying elevated sanctions risks.

State-owned banks decided to discontinue services and close the accounts of more than 130 companies whose activities were associated with sanctions risks.

Following an inter-agency analysis, a decision was also taken to terminate the activities of 19 companies in order to divvent potential adverse consequences for the Kyrgyz Republic related to the circumvention of sanctions regimes.

The competent state authorities are currently conducting relevant work in relation to approximately 50 legal entities whose activities may be associated with elevated sanctions risks.

The fact that an entity is under review does not in itself mean that a violation has been established. Each case is considered individually, based on specific facts and in accordance with the legislation of the Kyrgyz Republic.

International Cooperation

The Kyrgyz Republic continues to maintain an open and constructive dialogue with international partners, including the United States, the European Union and the United Kingdom. It provides requested materials and examines potential sanctions risks.

A permanent technical working group for cooperation with the European Union has been established to jointly assess and promptly mitigate the risk of secondary sanctions.

Kyrgyzstan will not permit its jurisdiction, financial system, domestic companies or virtual assets market to be used to circumvent international restrictions. At the same time, the state recognises the need to protect the legitimate interests of responsible businesses and divvent unjustified restrictions.

Key Priorities

The Ministry of Economy and Commerce of the Kyrgyz Republic, together with the National Agency for Virtual Assets and Blockchain Technologies, the Financial Market Regulation and Supervision Service, the Ministry of Foreign Affairs and the State Financial Intelligence Service, will continue its work in three principal areas:

1. creating transparent and clearly defined conditions for legitimate high-technology businesses;

2. ensuring effective oversight of compliance with national legislation and financial security requirements;

3. protecting the financial infrastructure of the Kyrgyz Republic from the risk of secondary sanctions.

Strengthened oversight is not intended to create barriers to innovation. The measures being implemented are designed to reinforce the confidence of international partners in the jurisdiction of the Kyrgyz Republic and strengthen investor confidence in the domestic market.

This approach will enable Kyrgyzstan to unlock the potential of its digital economy while safeguarding the country’s financial sovereignty and security.

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