Uzbekistan Bans Cryptocurrency, Setting The Stage For A Crypto Black Market

December 26, 2019 / by Crypto.IQ

Uzbekistan, a country with 33 million people bordering Afghanistan and Kazakhstan, has banned cryptocurrency purchases. This sets the stage for a crypto black market to proliferate in the central Asian country.

This decision comes only a year after Uzbekistan legalized crypto trading and began handing out crypto exchange licenses. Perhaps the sudden change of heart from the government is due to the rapid inflation of the Uzbekistani Som (UZS), which has lost 12.5% of its value relative to the USD in the past year, and 75% of its value relative to the USD in the past 5 years.

Indeed, other countries which have experience fiat hyperinflation, such as Zimbabwe and Iran, have taken measures to ban crypto, since their respective governments believed that cryptocurrency usage was diverting capital and value away from the native fiat currencies, accelerating hyperinflation.

Considering the severe fiat inflation situation in Uzbekistan, it is likely that citizens will still seek out cryptocurrency, which will likely lead to a flourishing crypto black market. A crypto black market cannot be taxed nor easily regulated, especially since cryptocurrency is difficult to trace and can be exchanged in peer to peer deals for cash. Also, profits from the crypto black market could help increase the revenues of gangs and mafias.

Ultimately, it is better for a government to regulate cryptocurrency rather than make it illegal, since a regulated cryptocurrency market can be taxed, monitored to prevent money laundering, and profits would go towards legitimate corporations rather than underground organizations.

Therefore, Uzbekistan has made the wrong decision, and any cryptocurrency woes Uzbekistan had before this decision will look like a cake walk compared to what is to come.