Crypto Mining, Digital Asset Treasuries and Green Energy in GMC: The Legal Structure

Summary

• Mining, validating and staking your own assets are not listed as Regulated Activities in Schedule 1 to the Financial Services Act 2025. What can become regulated is what you do next: selling, holding for others, or managing for others.
• The General Prohibition (s. 16) applies only where a Regulated Activity is carried on "by way of business" in GMC. Schedule 1, Part 1, para. 3 sets the three-limb test.
• Selling mined coins is "Dealing in Investments as Principal" (Sch. 1, para. 4). The para. 5 "absence of holding out" exclusion is drafted for Securities, not Virtual Assets, so a miner or treasury relies on the para. 3 test and paras. 76, 77 and 79.
• Tax: 15% on a company's chargeable income (Income Tax Act 2025, s. 43(1)(a)); coins moved from trading stock into a permanent treasury trigger a deemed disposal at open market value (s. 10J); computers and prescribed automation equipment can be written off at 100% by election (s. 19A(2)).
• Sites and power: land identification and long-term leases run through the Economic Development Group's one-stop shop. Tariffs and lease terms are set in the lease and power agreement, and duty rates by Gazette order.

Why GMC for energy-backed digital asset operations

Two of GMC's eight official priority industries are "Green Energy and Technologies" and "Finance and Digital Assets", and the Royal Charter No. 1 of 2024 gives the GMC Authority express power over "dealing in digital assets" (Art. 5). The Gelephu Financial Services Office (GFSO) regulates financial services and virtual asset activities under one framework. "$" means United States dollars throughout (Income Tax Act 2025, s. 2AA; Companies Act 2025, s. 4A).

Part 1: Is mining or staking a Regulated Activity?

The perimeter: activity plus "by way of business"

An activity is a Regulated Activity if it is specified in Schedule 1 (Financial Services Act 2025, s. 19). Section 16 prohibits carrying on a Regulated Activity "by way of business in GMC" unless the person is a Licensed Firm (a firm holding a Financial Services Licence from GFSO) or an Exempt Firm (a person listed in Schedule 3).

Schedule 1, Part 1, para. 3 defines "by way of business": a person (a) engages in the activity in a manner which in itself constitutes the carrying on of a business, (b) holds himself out as willing and able to engage in it, or (c) regularly solicits others to engage with him in such transactions. GFSO may make rules refining that test (s. 6).

Mining and validating your own rewards

None of the activities in Schedule 1, Part 2 is "mining", "validating" or "staking". The list covers dealing (paras. 4 and 12), arranging (para. 16), advising (para. 28), custody (para. 43), money services (para. 52), issuing a fiat-referenced token (para. 53B), operating a trading facility (para. 54), managing assets (para. 56), managing a collective investment fund (para. 59) and agreeing to do any of these (para. 70). Receiving block or protocol rewards for validating with your own hardware and tokens fits none of them. The Act does not treat producing a Virtual Asset (a digital representation of value that is digitally tradeable and is not legal tender anywhere) as a financial service.

Selling what you mine

Para. 4 makes "Buying or Selling Financial Instruments, Virtual Assets, or Spot Commodities ... as principal" a specified activity, so a miner converting rewards into dollars is, on the face of it, selling Virtual Assets as principal. Para. 5, the "absence of holding out" exclusion, says a person does not deal as principal by entering into a transaction "which relates to a Security" unless it market-makes, holds itself out as a dealer, underwrites or solicits the public. "Security" is defined by reference to paras. 87 to 93 and 99A (shares, debt instruments, units and so on). A Virtual Asset is not a Security, so the safe harbour most people assume protects own-account traders does not, on its terms, cover own-account token sales.

A miner has two lines of argument, both of which should be written down:

1. The para. 3 test. The business is mining. Sales of output realise its product; they are not a dealing business "in themselves". The operator does not hold itself out as willing to trade with others and does not solicit counterparties. Infrequent sales through a licensed venue sit at one end of the spectrum; a desk quoting prices to third parties at the other.
2. The Chapter 18 exclusions. Para. 11 makes para. 4 subject to paras. 74, 76, 77, 78, 79 and 82. Para. 77(1) excludes principal-to-principal transactions between members of the same Group, covering transfers from a mining subsidiary to a group treasury. Para. 76(3) excludes a transaction by a "supplier" (a person whose main business is selling goods or supplying services) with a non-individual "Customer" in connection with that supply, which helps a hosting company paid in tokens by corporate clients.

Because this is construction rather than an express exemption, record the analysis and raise it at the initial GFSO meeting that opens the licensing process published by the Gelephu Financial Services Office.

When mining or staking becomes regulated

The perimeter is crossed when other people's assets or money are involved:

Two further rules apply. Under s. 5A(4), no person may carry on a Regulated Activity in GMC involving "an algorithmic stablecoin token, a privacy token, or any digital asset employing similar technology"; a miner may mine a privacy coin but cannot build a regulated service around it. And s. 19A prohibits anyone, licensed or not, from conduct "in or from the GMC" in relation to a Virtual Asset that is misleading, deceptive, fraudulent or dishonest, which reaches a miner's public statements about hash rate, energy sourcing or treasury holdings.

Part 2: The corporate treasury

A GMC company has "full capacity to carry on or undertake any business or activity" unless its constitution restricts it (Companies Act 2025, s. 23(1), (1B)). Nothing in the Companies Act singles out digital assets; a board adopting a token treasury policy exercises ordinary powers, subject to each director's duty to "act and use reasonable diligence" (s. 157(1)).

Every company must keep accounting records that "sufficiently explain the transactions and financial position of the company", retained for at least five years (s. 199(1), (2)), and its financial statements must comply with the Accounting Standards (s. 201(2)). For a token treasury that means wallet-level ledgers, reconciliation to chain data and documented valuation at each reporting date.

A treasury that buys, holds and rebalances enters into para. 4 transactions as principal; the analysis is the same as for the miner. Hedging with derivatives can rely on para. 10, which excludes derivative transactions between non-individuals whose main purpose is limiting an identifiable risk of a business consisting mainly of non-regulated activities. Group treasuries transacting with group companies use para. 77.

Part 3: Tax

The charge and the rate

Income tax is charged on income "accruing in or derived from GMC or received in GMC from outside GMC", including gains or profits from any trade or business (Income Tax Act 2025, s. 10(1)(a)) and "any gains or profits of an income nature" not otherwise caught (s. 10(1)(g)). A company pays 15% on every dollar of chargeable income (s. 43(1)(a)) and is resident where "the control and management" of its business is exercised in GMC (s. 2(1)). The first year of assessment runs from 1 January 2026, on the preceding year's income (ss. 2(1), 35(1)).

Block rewards are receipts of the mining trade. Electricity, hosting fees and rent are deductible as outgoings "wholly and exclusively incurred" in producing the income (s. 14(1)). Computations are in US dollars (s. 62A) unless the functional-currency rule in s. 62B applies.

Section 10J: moving coins from stock to treasury

Section 10J applies where a person carrying on a trade "appropriates any trading stock of that trade or business for a purpose other than for sale or disposal in the ordinary course" in circumstances that "give rise to a reasonable inference that the appropriation is permanent" (s. 10J(1)). Holding the stock "as a capital asset" is expressly such an appropriation (s. 10J(2)(a)), and "trading stock" means property of any description sold in the ordinary course of the trade (s. 10J(9)).

For a miner that routinely sells its rewards, mined coins are trading stock. If the board resolves to keep a tranche permanently, s. 10J(3)(b) treats their open market value at the date of appropriation as income of the trade for that year. Notice must be given with the return, or later if the Comptroller allows (s. 10J(5)); otherwise the income is assessed in the year the Comptroller discovers the facts (s. 10J(8)).

So decide at the outset which entity mines-to-sell and which holds. Whether a treasury's eventual realisation is an income gain under s. 10(1)(g) or a non-taxable capital gain is a question of characterisation (see our guide to capital gains and s. 13W).

Section 19A: writing off the rigs

Capital expenditure on machinery or plant attracts an annual allowance of 33 1/3% (s. 19A(1)). Where the taxpayer proves to the Comptroller's satisfaction that it has installed "a computer or other prescribed automation equipment" for its trade, it may elect a 100% allowance instead (s. 19A(2)). Whether a particular ASIC or GPU rig is a "computer", and what else is "prescribed", is for the Comptroller and rules under the Act.

Incentives with a 2030 deadline

An "approved founders company" in a "founders industry" (one not carried on in GMC on a scale adequate to GMC's needs, with favourable prospects) can be exempt on that income for up to 15 years in total (s. 13Y(1), (2), (8)); a "strategic and development company" can be approved for a concessionary rate of not less than 5% (s. 43D). Neither provision names mining or energy, and no approval may be given under either after 31 December 2030 (ss. 13Y(5), 43D(4)). Individuals who are not citizens of Bhutan pay 0% on chargeable income derived on or before 31 December 2030, resident or not (s. 43(1)(ba)), which covers the founders and engineers a mining operation brings in.

Part 4: Land, power and the one-stop shop

The Economic Development Group (EDG) runs GMC's one-stop shop for investors: land identification, lease guidance, company incorporation, regulatory clearances and government coordination, with "flexible long-term lease arrangements". Power tariffs, lease durations, rents and connection timelines are negotiated and set in the lease and power agreement. Imported hardware enters under the Customs Act 2025, where duty rates are set by Gazette order and exemptions may be granted by Gazette order or individual direction. Every company needs a director ordinarily resident in GMC (Companies Act 2025, s. 145(1)), and foreign staff need work passes (Employment of Foreign Workforce Act 2025, s. 5).

Practical checklist / Next steps

1. Separate a mining/operating company from a treasury company at the start; document which coins are trading stock (s. 10J).
2. Write a perimeter memorandum applying Sch. 1, Part 1, para. 3 and paras. 4, 10, 11, 76, 77 and 79 to your real sales, hedging and intra-group flows, and raise it at the initial GFSO meeting.
3. Screen every token against s. 5A(4) and the Accepted Virtual Asset concept.
4. Adopt a board treasury policy, wallet controls and valuation procedures meeting Companies Act ss. 157, 199 and 201.
5. Model the tax: 15%, s. 19A elections, s. 14 deductions, and whether a s. 13Y or s. 43D application is realistic before 31 December 2030.
6. Engage EDG on site, lease and power; incorporate through GCRO with a resident director; apply for work passes.

Frequently asked questions

Do I need a GFSO licence to mine cryptocurrency in GMC?

Mining and validating with your own equipment and tokens is not a listed Regulated Activity in Schedule 1. A licence question arises when your sales amount to a dealing business under Part 1, para. 3, or when you hold, manage or pool other people's assets (paras. 43, 56, 59).

What happens for tax when I stop selling mined coins and start holding them?

Section 10J treats a permanent appropriation of trading stock to a capital purpose as a sale at open market value on that date. That value is income of the trade, taxed at 15% for a company, and must be notified in the return.

Can I write off mining hardware in one year?

Section 19A(2) allows a 100% allowance, by election, for a computer or other prescribed automation equipment installed for the trade, to the Comptroller's satisfaction; otherwise s. 19A(1) gives 33 1/3% a year.

Key takeaways

• Producing Virtual Assets is outside Schedule 1; dealing, custody, discretionary management and pooling are inside it, subject to the "by way of business" test.
• The para. 5 safe harbour is written for Securities, so own-account token sales rest on para. 3 and paras. 76, 77 and 79.
• Section 10J turns a hold decision into a deemed disposal at market value; structure the entities before the first block.
• 15% is the corporate rate; s. 19A can accelerate hardware write-offs; the 0% individual rate and the s. 13Y and s. 43D windows run to 31 December 2030.
• Sites, leases and power are arranged through EDG and are matters of contract, not statute.

This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.

You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.

References

• Royal Charter No. 1 of 2024, Art. 5
• Financial Services Act 2025, ss. 5A, 6, 16, 19, 19A, 106; Schedule 1, Part 1, para. 3; Part 2, paras. 4, 5, 10, 11, 43, 56, 59, 70, 76, 77, 79; Schedule 3
• Income Tax Act 2025, ss. 2(1), 2AA, 10(1), 10J, 13Y, 14(1), 19A, 35(1), 43(1)(a), 43(1)(ba), 43D, 62A, 62B
• Companies Act 2025, ss. 4A, 23, 145, 157, 199, 201
• Application of Laws Act 2024, Schedule C; Customs Act 2025; Employment of Foreign Workforce Act 2025, s. 5