New kyrgyzstan crypto law puts president in charge as EU eyes fresh sanctions

Amid growing geopolitical pressure, lawmakers have overhauled financial rules to tighten control over the kyrgyzstan crypto sector and its expanding stablecoin market.

President Zhaparov signs tighter virtual asset framework

Kyrgyz President Sadyr Zhaparov has signed amendments to the law “On Virtual Assets,” reshaping the country's cryptocurrency regulation. The updated framework introduces clear legal definitions for stablecoins and for “tokens,” the official label now used for cryptocurrencies. Moreover, the changes specifically address how the state can participate in mining and digital asset issuance.

Under the new law, the government, including state-controlled companies, may conduct mining operations. These activities are intended to help build a national crypto reserve, support local blockchain projects, and accelerate the development of Kyrgyzstan's digital economy. However, the legislation also clarifies requirements for private-sector miners, who face stricter oversight.

All other mining enterprises must undergo mandatory registration and certification. They are required to report to the state which crypto wallets they use to accumulate mined coins. In addition, they must comply with detailed technical and fire safety standards, signaling a push to formalize previously opaque operations and tighten state owned mining rules.

Crucially, the amended law hands President Zhaparov and his administration direct authority over the procedures for issuing and circulating cryptocurrencies, the Russian outlet Rossiyskaya Gazeta reported on Wednesday. That said, the president has also been empowered to launch pilot projects to test innovative services and technologies in the digital asset space.

According to the amendments, only coins backed by other assets will be issued domestically, and the issuance process will be strictly regulated by the government. This approach aims to reduce speculative risks while preserving room for innovation in tokenized financial instruments and stable-value assets.

Kyrgyzstan positions itself as a regional stablecoin hub

Kyrgyzstan has already rolled out two domestic stablecoins: the U.S. dollar-pegged USDKG and KGST, which is linked to the national fiat, the Kyrgyz som. Both tokens are designed for settlements, including cross-border payments, and are central to the country's emerging kyrgyzstan stablecoin policy.

USDKG, launched in November, is backed by gold. Authorities in Bishkek hope this structure will strengthen Kyrgyzstan's, and more broadly Kazakhstan's, position in the global financial system and attract foreign capital and business. Moreover, the asset backing is meant to offer more credibility than many uncollateralized digital coins, enhancing trust among international partners.

The KGST token was developed as part of the national central bank digital currency (CBDC) initiative and is supported by reserves held in state-owned banks. This design reflects a model similar to other CBDC pilots worldwide, where tokenized units represent claims on central or public financial institutions, aligning with kgst cbdc reserve backing principles.

Authorities plan to list both USDKG and KGST initially on domestic and regional crypto exchanges and, over time, on global trading platforms. However, these ambitions are unfolding against a tense geopolitical backdrop, where any expansion in digital asset activity can draw scrutiny from Western regulators and partners.

Another stablecoin, the ruble-pegged A7A5, has become a major headache for Bishkek. The token was developed in Russia but is currently issued by a company registered in Kyrgyzstan. As a result, the project and its related entities have attracted intense international attention to the country's digital asset ecosystem.

The ruble-linked coin and associated players, including local crypto platforms and banks, have been targeted with sanctions by the U.S., the EU, and the U.K.. Western authorities suspect that A7A5 is being used to bypass financial restrictions imposed on Russia after its invasion of Ukraine. This case illustrates how a single ruble pegged stablecoin can expose an entire jurisdiction to global compliance risks.

Launched in early 2025, A7A5 now accounts for nearly half of the non-dollar stablecoin market. According to a recent study by blockchain analytics firm Elliptic, the coin has processed over $100 billion worth of transactions in less than a year, as reported by Cryptopolitan. Moreover, that volume underscores how quickly new digital assets can scale when they meet strong cross-border demand.

Mining and issuance under presidential oversight

As the new rules take hold, the issuing and circulation of cryptocurrencies will effectively fall under direct presidential supervision. In practice, this means the concrete procedures for launching and managing tokens will be defined by Zhaparov's office. For the broader kyrgyzstan crypto landscape, this centralization could provide clarity but also concentrate decision-making power.

The law's mining provisions also signal a dual-track strategy. On one hand, the state can mine through its own companies in pursuit of a national crypto reserve and to support blockchain development. On the other, private miners face higher compliance obligations, including transparent wallet reporting and adherence to strict safety requirements. However, some industry participants may view the added bureaucracy as a barrier to entry.

These digital asset mining rules come as countries worldwide rethink how to balance energy use, taxation, and financial integrity in the mining sector. Kyrgyzstan's approach appears to favor a more controlled environment in which public-sector involvement is explicitly sanctioned, while unregistered or non-compliant operators face increased legal risk.

EU considers fresh sanctions targeting Bishkek

The legal overhaul arrives just as the European Union weighs new punitive measures against Kyrgyzstan. Last week, Bloomberg reported that Brussels is exploring ways to raise the pressure on Bishkek, potentially activating a mechanism to block certain exports to the Central Asian nation. The move is framed as a response to alleged assistance to Russia in evading existing sanctions.

This mechanism would allow the EU to restrict supplies of sensitive goods to a specific country. In the case of Kyrgyzstan, the categories under discussion reportedly include machine tools and radio equipment. Moreover, Western officials suspect some of these products might be re-exported to Russia, undermining the effectiveness of previous sanctions rounds.

In reaction, the Kyrgyz government announced this week that it is initiating consultations with the European Union over the reported preparations for Russia-related penalties. Deputy Prime Minister Daniyar Amangeldiev told local media that an online meeting with EU Sanctions Envoy David O'Sullivan may take place soon. However, he emphasized the lack of any formal confirmation from Brussels so far.

Amangeldiev also insisted that Kyrgyzstan has already curbed exports of dual-use goods. He argued that, in his view, there are no grounds for European sanctions on the country. Still, ongoing debates about eu sanctions on kyrgyzstan and crypto-fueled circumvention underscore how digital assets are now integral to wider geopolitical and trade disputes.

Overall, the new framework seeks to reinforce state control over tokens, mining, and asset-backed issuance while positioning Kyrgyzstan as a regional stablecoin hub. Yet, as the A7A5 controversy and potential EU measures show, the country's digital asset strategy will remain tightly intertwined with international sanctions policy and evolving global crypto regulation.