THE CONCEPT AND ESSENCE OF CRYPTOCURRENCY

The relevance of the research topic is related to the distribution and development of a new financial instrument, aimed at studying and developing such issues as the features of the object and subject of crimes committed in the circulation of cryptocurrency in our country and in other countries, international cooperation in the field of cryptocurrency circulation and the experience of foreign countries in this direction. These questions are important not only for understanding the relationship between the use of cryptocurrencies by transnational criminals, but also for finding measures to control and prevent such cybercrimes. It is necessary to make one more note, in this final qualification work such terms as cryptocurrency, virtual currency, digital currency and digital cash will be used interchangeably to describe cryptocurrency. In the era of globalization, the accelerated development of technology, it is impossible not to notice and feel the influence of the virtual world. This virtual world, referred to as the Internet, has simplified many life processes. In the recent past, crimes were more local and less transnational.

VOLUME 3 ISSUE №1 E-ISSN: 2181-1024 A P R Volume I L1 (2022) 3, Issue 2022 TSUL Legal Report 1

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TSUL LEGAL REPORT INTERNATIONAL ELECTRONIC SCIENTIFIC JOURNAL

Rustambekov Islambek Rustambekovich Deputy Rector on Academic Affairs, Tashkent State University of Law, Doctor of Law, Professor

Salaev Nodirbek Saparbaevich Deputy Rector on Research and Innovations, Tashkent State University of Law, Doctor of Law, Professor

Latipov Samir Ildusovich Director of the Center for Legal Initiatives and Innovations, Tashkent State University of Law

Nematov Jasur Aminjonovich Professor of the Tashkent branch of the Russian University of Economics named after GV Plekhanov

Umarkhanova Dildora Sharipkhanovna Dean of the Faculty of International Law and Comparative Legislation, Tashkent State University of Law, Doctor of Law, Associate Professor

Abzalova Khurshida Mirziyatovna Acting Professor of the Department of Criminal Law, Criminology and Anti-corruption, Tashkent State University of Law, Doctor of Law

Nematov Jurabek Nematulloyevich Acting Professor of the Department of Administrative and Financial Law, Tashkent State University of Law, Doctor of Law

Akhmedova Guzalkhon Utkurovna Associate Professor of Criminalistics and Forensic Examination Department of Tashkent State University of Law, Doctor of Law

Ergashev Ikrom Abdurasulovich Head of Scientific Department, Tashkent State University of Law, Associate Professor, Doctor of Philosophy in Law.

Yusupov Sardorbek Bahadirovich Head of the Department of Administrative and Financial Law, Tashkent State University of Law, Associate Professor, Doctor of Philosophy in Law

Gafurova Nozimakhon Eldarovna Head of the Department of International Law and Human Rights, Tashkent State University of Law, Associate Professor, Doctor of Philosophy in Law

E-ISSN: 2181-1024 Volume 3, Issue 1 (2022) TSUL Legal Report 3

Khujaev Shokhjakhon Akmaljon ugli Head of Intellectual Property Law Department, Tashkent State University of Law, Doctor of Philosophy in Law

Uzakova Guzal Sharipovna Head of Environmental Law Department, Tashkent State University of Law, Associate Professor, Doctor of Philosophy in Law

Turdiev Khayitjon Usmonkul ugli Acting Associate Professor of the Department of Theory of State and Law, Tashkent State University of Law, Doctor of Philosophy in Law

Ramazonova Nargiza Abdirashidovna Head of the International Relations Department, Intellectual Property Agency under the Ministry of Justice of the Republic of Uzbekistan, Doctor of Philosophy in Law

Kurbanov Maruf Mamadaminovich Acting Associate Professor of the Department of Criminal Law, Criminology and Anti-corruption, Tashkent State University of Law, Doctor of Philosophy in Law

Narziev Otabek Sadievich Acting Professor of International Private Law Department, Tashkent State University of Law, Doctor of Philosophy in Law

Pirmatov Otabek Shavkatovich Acting Associate Professor of the Department of Civil Procedural and Economic Procedural Law, Tashkent State University of Law, Doctor of Philosophy in Law

Yakubova Iroda Bakhramovna Acting Associate Professor of Intellectual Property Law Department, Tashkent State University of Law, Doctor of Philosophy in Law

Shamsutdinov Behruz Sadriddin ugli Head of the Department of Commercialization of Scientific and Innovative Projects, Tashkent State University of Law

Saydakhmedov Umid Murodovich Judge for Economic Affairs, Tashkent Regional Court, Doctor of Philosophy in Law, Associate Professor

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Contacts Editorial office address: Tashkent, st. Sayilgoh, 35. Index 100047. Principal Contact Tel.: ([phone number hidden] Fax: ([phone number hidden] E-mail: info@legalreport.tsul.uz

© 2022. TSUL – Tashkent State University of Law. All rights reserved.

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IKHTIYORJON TURABOEV, IKROM ERGASHEV Tax monitoring in Uzbekistan: problems and issues ............................................................8

DILMURODJON RAKHIMOV Organizational and legal issues of gender equality in the civil service .............................. 15

NOILA NURMAMATOVA Mechanism of appeal to the Constitutional Court .............................................................. 23

ILHOM NOROV Problems of public service in the Republic of Uzbekistan: further improvement of the public service system .............................................................................................. 30

12.00.03 – CIVIL LAW. BUSINESS LAW. FAMILY LAW. INTERNATIONAL PRIVATE LAW

BEGALI XOLMIROV The concept, importance and characteristics of electronic currency ................................. 37

MUHAMMAD ALI RAMAZONOV The concept and essence of cryptocurrency ..................................................................... 44

PARIZODABEGIM MUKHAMATKULOVA Some issues of regulation of cybersport and business activities in IT .............................. 51

12.00.04 – CIVIL PROCEDURES LAW. ECONOMIC PROCEDURES LAW. ARBITRATION PROCESS AND MEDIATION

ABDUMURAD KHAKBERDIEV Types of arbitration courts and their classification ............................................................. 57

DONIYORBEK DАVRONOV Procedure and basis for application of procedural coercive measures ............................. 68

12.00.08 – CRIMINAL LAW, CRIME PREVENTION. CRIMINOLOGY. PENAL LAW

BUNYOD ISLOMOV Mitigating factors and criminal defenses in criminal legislation of the Kingdom of Norway (comparative analysis) ...................................................................... 78

JALOLIDDIN HAYDAROV Qualification of crimes of torture and other cruel, inhuman or degrading treatment ......... 88

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12.00.09 – CRIMINAL PROCEDURE. CRIMINOLOGY, OPERATION SEARCH LAW AND FORENSIC EXAMINATION

SARBON URALOV Specific aspects of proof ................................................................................................... 96

KHAYDARALI YUNUSOV Contributions of Central Asian scholars to the development of islamic sciences: Sarakhsi – founder-father of international law ................................................................ 103

DJAMALIDDIN MUSAEV Principles of international cooperation in the field of preventing illicit trafficking in narcotic drugs, psychotropic substances and precursors . ........................................... 111

SHAHNOZA ALMOSOVA The essence of parallel import and problems of its regulation in the Republic of Uzbekistan . .................................................................................................. 121

USMON ALIEV Problems of reforming the UN security council and improving its effectiveness ............. 127

DALER VALIJONOV International legal cooperation of the prosecutors bodies against corruption ................. 134

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THE CONCEPT AND ESSENCE OF CRYPTOCURRENCY

Keywords: cryptocurrency, crypto asset, monetary surrogate, bitcoin, blockchain, cryptocurrency exchange, taxation, digital currency, digital asset, virtual money, mining, virtual assets, stablecoin, altcoin, tokens.

Ramazonov Muhammad ali Abdirashidovich Master’s student, Tashkent State University of Law e-mail: instagram321@mail.com ORCID: 0000-0002-6528-5495

The relevance of the research topic is related to the distribution and development of a new financial instrument, aimed at studying and developing such issues as the features of the object and subject of crimes committed in the circulation of cryptocurrency in our country and in other countries, international cooperation in the field of cryptocurrency circulation and the experience of foreign countries in this direction. These questions are important not only for understanding the relationship between the use of cryptocurrencies by transnational criminals, but also for finding measures to control and prevent such cybercrimes. It is necessary to make one more note, in this final qualification work such terms as cryptocurrency, virtual currency, digital currency and digital cash will be used interchangeably to describe cryptocurrency. In the era of globalization, the accelerated development of technology, it is impossible not to notice and feel the influence of the virtual world. This virtual world, referred to as the Internet, has simplified many life processes. In the recent past, crimes were more local and less transnational.

I. Introduction. crime of an international nature. The Internet The Internet has changed everything, provides opportunities for anonymity, lack of and we have come to such a time that now control, the Internet erases the boundaries it has become much easier to commit a of the world. The development of virtual

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trade and the rapid growth of attention to information technology has led to the emergence of a new financial instrument, with the help of which financial transactions are easily performed, investment activities are provided, and payments for goods and services are made between the parties to the transaction. This financial instrument was perfectly synchronized with transnational criminal activity. Technologies are developing so fast that the legal framework of many countries and states does not have time to regulate and give a specific meaning to such a term as cryptocurrency. Understandably, the legal framework does not have time to regulate, but many ordinary people cannot understand the general meaning of cryptocurrency, how it works and what it really is. The use of cryptocurrency is so simplified that any understanding person can use this financial instrument, without the bureaucracy and many other barriers that exist in conventional banks. At the moment, of all cryptocurrencies, bitcoin is the most popular and well-known, most of the research has been done on bitcoins. Since 2009, more than 75 virtual currencies have been created and are traded around the world, representing about $11 billion of state market value, of which Bitcoin is the leader, representing about $10 billion or 90% of the total market.[1] Although the situation may have changed a little since 2014, bitcoin still remains the leader among cryptocurrencies. However, this does not mean that bitcoin itself is not going anywhere. Bitcoin technology is truly an innovation where banking can take place without banks and without political interference through the use of cryptocurrencies. Based on the relevance of our study, we set ourselves the goal of: analyzing the cryptocurrency market and the legal regulation of cryptocurrency in the world in order to draw up a generalized picture of the connection between cryptocurrency and transnational crimes. To effectively achieve this goal, the study was aimed at solving the following tasks:

• consider the concept and essence of cryptocurrencies; • to study the terminological apparatus; • explore the connection and role of cryptocurrencies in transnational crimes; • study the mechanism for settling operations with cryptocurrency; • identify the main problems of the circulation of cryptocurrencies in the world; • to analyze the positive and negative legal experience of foreign countries; • development of proposals for regulating the circulation of cryptocurrency as an object of transnational crimes. Object of study: international legal relations in the field of circulation of cryptocurrency as an object of transnational crimes Subject of study - the legal nature of the issue and international legal framework, and national legislation in the field of regulation and use of cryptocurrency for criminal purposes, scientific and practical foundations and dogmas. So what exactly is a cryptocurrency? D. A. Kochergin notes that “virtual currency” (cryptocurrency) is a digital expression of the value of a purchase or sale in digital form and can be used as a medium of exchange, a unit of account, a store of value.[2] A.V. Yakubov and V.A. Kuznetsov consider cryptocurrency to be an electronic means of payment, with decentralized accounting of operations and according to the relevant protocols or rules and excluding the participation of an external administrator.[3] We are inclined to the position of D.A. Kochergin that cryptocurrency is a digital expression of value. The first cryptocurrency created in the world was called “Bitcoin” (Bitcoin) (bit-coin, a coin of the smallest unit of measurement of information). A lot of different cryptocurrencies with different source code and anonymity levels were created using the “Bitcoin” program code. Bitcoin is the first original cryptocurrency, launched in 2009 as open source software. It uses a distributed ledger of data - Blockchain. Users can make peer-to-peer transactions with digital currency. It has the highest

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liquidity and significant network effect. Its market capitalization is $130,226,456,119 and the value of one BTC is $7,672.43 (Coinmarketcap.com April 12). The value of Bitcoin peaked at nearly $18,000 in December 2017. Unlike fiat currencies, there is no official price for bitcoins. The price of bitcoins is calculated on average based on the price feeds of global exchange platforms. It was designed to have a fixed supply of up to 21 million coins. To date, more than 16 million coins have already been issued. (blockchain.info, April 12, 2018, 16.972.175). The price of bitcoins is determined by the market in which bitcoin is traded through supply and demand. Volatility is the biggest hurdle to using Bitcoin to trade as many coins as possible on a daily basis. It takes 10 minutes for the Bitcoin power of the network to find a block hashing solution, which is quite a long time compared to other coins.

Ethereum has the second largest market cap of 1,564 coins. Its market capitalization is $45,876,361,724 and the value of one ETH is $464.45 (Coinmarketcap.com April 12). Ethereum peaked at $1.218 in January 2018, when the price of bitcoin was also at its peak. Ethereum has a decentralized platform that runs smart contracts. It was launched in 2014, 5 years later than Bitcoin, but creates significant competition for Bitcoin. The platform is developed by the Swiss non-profit Ethereum Foundation. The developers of Ethereum explain that the system allows developers to create markets, keep registers of debts, move funds according to longgiven instructions (such as a will or futures contract), and much more that has not yet been invented, and all this without the risk of intermediaries or a counterparty.[4] One of the biggest advantages of Ethereum is the block time; just 20 seconds. The main goal of Ethereum is the functioning of a decentralized Internet and an application store to support new types of applications. Unlike Bitcoin, Ethereum does not have a limited supply. In the case of coins, Ethereum itself is not a coin. Ether is the coin of Ethereum. To maintain its functionality, the system needs income. Ether is a unique piece of code that can be used to pay for the computing resources required to run an application or program. Like bitcoin, ether is a bearer digital asset (similar to security). However, no third party is required to process or approve the transaction. The fee for each Ethereum transaction is calculated based on how many “units” are required for the action. Each ether represents a unit. According to these unit needs for actions on the Ethereum platform, the total number of units is calculated, which is paid in Ether.[5] In addition, the Ethereum platform is the largest Dapp (decentralized applications) platform in the cryptocurrency market.

Basic elements of cryptocurrency The main elements of crypto assets can be called:

1) the use of asymmetric encryption. That is, two types are used in encryption • symmetric encryption. When using one key and formula, you can convert the original information into another. Decryption takes place using the same formula and key • asymmetric encryption. This encryption uses two keys: the “public key” is known to everyone, and the “private key” is known only to its holder. Using a “private” key, it is easy to establish “open”, but using an “open” key, it is almost impossible to establish “closed”; 2) “Blockchain” (Block-chain), - a distributed ledger, 3) application of the principle of evidence - is used to solve several problems at once: • maintain the speed of transactions at an average of 10 minutes; • exclude the possibility of an attacker creating a sufficient number of pseudo-users under his control, confirming transactions; • make the network resilient to collapse through the use of the most common methods of spam and d-dos attacks.

At this stage of scientific research, when considering the concept and essence of cryptocurrency, we consider it appropriate to compare cryptocurrency with fiat currency.

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According to K.Yu. their real value is established and guaranteed by the state, regardless of the cost of the material from which the money is made.[6] In simple words, these are state, national and private currencies. The development of a terminological apparatus, practical for the legal regulation of relations that begin in the field of the use of cryptocurrencies and decentralized registries, seems to be a paramount task, because: 1) in the course of developing a predominantly suitable type of definition, there is an understanding of the corresponding phenomenon at a fairly complete level, which seems to be a sufficient condition for further development of appropriate legal regulation in relation to it; 2) in the conditions of Uzbek legal realities, without an appropriate a term in a law or by-law, disputes may arise regarding the legality of the relevant phenomenon or the legality of actions with it; 3) terms and definitions are represented by the main structures of the relevant legal system (civil law, tax, currency, etc.) The lack of a precise definition of a legal phenomenon gives rise to an ambiguity regarding the scope of use of the legal regime related to it; The terminology used to describe cryptocurrencies varies greatly from digital currency, virtual currency, e-currency to virtual asset, virtual commodity, digital financial assets. Based on the fact that all over the world, for the purposes of taxation and control of cryptocurrencies, the terminological apparatus is very contrasting, we would like to analyze the most important and common existing terms. The Financial Action Task Force (FATF) has proposed the following definition of virtual currency: A virtual currency is a means of expressing value, presented in digital format and acting as a medium of exchange, either a unit of account or a store of value, and at the same time not falling under the concept of legal tender, i.e. which is not officially valid legal tender in settlements with creditors.

[7] Digital currency is a means of digital expression of either virtual currency (non-fiat currency) or electronic money (fiat currency) and is therefore often used as a synonym for “virtual currency”.[8] Convertible (open) virtual currency - has an equivalent value in real currency and can be exchanged for real currency and vice versa. Examples of convertible virtual currency are: Bitcoin (Bitcoin); E-Gold (Electronic Gold - no longer exists); Liberty Reserve (Liberty Reserve - no longer exists); Second Life Linden Dollars (Linden Dollars in the game “Second Life”); and WebMoney (WebMoney). Non-convertible (or closed) virtual currency - designed for use in specific virtual realms or worlds, such as global multiplayer online role-playing games or the Amazon. com store, and which, according to the rules governing its use, cannot be exchanged for fiat currency. Examples of non-convertible virtual currency are: Project Entropia Dollars (Dollars in the game “Project Entropia”); Q Coins (Q Coins); and World of Warcraft Gold (Gold in the World of Warcraft game). By the way, do not forget that even if this virtual currency, according to the conditions of the administrator, is used in the virtual world or in some kind of game and will be non-convertible, there is a possibility of the appearance and emergence of shadow black markets where it will be possible to exchange this currency for fiat money. Cryptocurrency - means a decentralized convertible currency based on mathematical principles, which is protected using cryptographic methods, i.e. uses cryptography to create a distributed, decentralized and secure information economy. Bitcoin (Bitcoin) - units of account in the form of a unique chain of digital and alphabetic characters that make up a set of currencies and have value only because users are willing to pay for them. Bitcoin trading is carried out digitally by users with a high degree of anonymity, and bitcoins can be exchanged (bought or sold) for US dollars, euros, and other fiat or virtual currencies.

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Altcoin is a decentralized convertible virtual currency based on mathematical principles, different from bitcoin, which became the first currency of its kind. Currently, examples of altcoins are: Ripple, PeerCoin, Lite-coin, zerocoin, anoncoin, and dogecoin. Cryptsy, one of the popular exchange services, reportedly exchanges over 100 different virtual currencies (as of April 2, 2014).

Anonymizers are tools and services, such as darknets and mixers, designed to obscure the origin of bitcoin transactions and promote anonymity. Examples are: Tor network (anonymous network), Dark Wallet (anonymous network service), Bitcoin Laundry (“mixer”).

“Mixer” (Mixer) (laundering service, “mixer”) is a type of anonymizer that provides hiding the chain of transactions in the block chain by linking all transactions to the same bitcoin address, and sending them all together in this way , which gives the impression that they are sent from a different address. The “mixer” or “mixer” directs transactions through a complex series of quasi-arbitrary fictitious transactions, which makes it extremely difficult to link specific virtual money (addresses) to a specific transaction. Mixer services work by receiving an order from the user to send funds to a specific bitcoin address. After that, the “mixer” “mixes” this transaction with the transactions of other users in such a way that it becomes unclear to whom the user intends to send funds. Examples of “mixer” services are: Bitmixer. io; sharedcoin; Blockchain.info Bitcoin Laundery; bitlaunder; easycoin.

The Tor network (originally called “The Onion Router”) is an anonymous distributed network of computers on the Internet that hides the true IP addresses (network protocol addresses) and therefore the identities of network users by routing communications/operations through a large number of computers located throughout world, and repeatedly coding them. The Tor network makes it extremely difficult to physically locate computers that host or access websites on the network.

“Dark Wallet” means a wallet that is a component of the Chrome browser (and possibly Firefox) designed to anonymize bitcoin transactions through the use of the following features: automatic anonymizer (“mixer”), decentralized trading, uncontrolled platforms for fundraising, black markets for stock markets and information, and decentralized markets like the Silk Road.

There are two types of cryptocurrency storage in electronic wallets:

“Cold Storage” means an offline Bitcoin wallet, i.e. A bitcoin wallet that does not have an internet connection. “Cold Storage” can be protect stored virtual currency from hacking (hacker attacks) and theft.

“Hot Storage” means an online Bitcoin wallet. Since the wallet is connected to the internet in this case, hot storage is more vulnerable to hacking/theft than cold storage.

Virtual currency wallet is a tool (software application or other mechanism/carrier) for depositing, storing and transferring bitcoins or other virtual currency.

A token is a unit of account designed to represent a digital balance, acting as a “substitute for securities” in the digital world, representing a ledger entry distributed on the blockchain. The token is issued by a legal entity or an individual entrepreneur (issuer) in order to attract investment and funding for activities; Stablecoin is a crypto asset, the value of which is tied to the asset of a legal entity; Crypto-asset - a set of records in the blockchain that has value and owner; cryptoexchange - an organization that provides an electronic platform for the exchange, purchase and sale of crypto-assets and tokens; A smart contract is an agreement between the parties that exists in the form of a program code that operates in a distributed data registry, which ensures the self-execution of the terms of such an agreement upon the occurrence of circumstances predetermined in it.

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Summarizing the above, we come to the conclusion that in fact, a cryptocurrency is just an encrypted number that has a value or price.

In addition, I would like to offer a couple of definitions that, in our opinion, should be included in the list of legal terms. For example, the term DRD (Distributed Data Registry) is an information system that includes an information base of a distributed type, which stores information about certain facts and (or) records of the right to certain property, the evidence of which is carried out by means of predetermined algorithms. Obviously, this term and definition should be used instead of the term blockchain, for the reason that many people do not understand that every blockchain is a distributed ledger of data, but not vice versa. This term and concept is much broader than the term blockchain and the difference is that in the blockchain the data is compiled into blocks and only new data is allowed to be added, the actions are more limited than in the RRD.

Today, a lot of research is going on on the issue of specifying cryptocurrency in the civil law aspect, this is true, since without establishing an objective side in civil law, there will be great ambiguities and difficulties in establishing an objective side in criminal or international law. As we know, civil law is fundamental in the system of law. Many analyzed authors describe only the technical side of the essence of cryptocurrency, for example, V.N. Kalinin believes that this is “the newest type of monetary currency, which is a decentralized accounting of digital assets based on blockchain technology and using cryptography methods in the process of operation.”

The only wrong thought, in our opinion, in this quoted passage is that V.N. Kalinin believes that this is “the newest type of monetary currency”. This concept is confusing because, in essence, from an economic point of view, the most obvious and at first glance the right decision is to equate cryptocurrency with money, since it performs part of their functions (means of payment, exchange and accumulation) in circulation. And first of all, the question arises, is it possible to attribute cryptocurrency to noncash funds? However, from a legal point of view, it seems that, in accordance with the requirements of law, a digital asset cannot be recognized as money for a number of reasons.[9]