Azerbaijan and Cryptocurrency
Azerbaijan Cryptocurrency & Blockchains Laws
Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
There is currently no specific regulation of virtual or cryptocurrencies in Azerbaijan. While there is no statutory regime applicable to cryptocurrencies, existing regulatory provisions may apply.
The Banking Law provides that monetary transmission (money transfer services or payment instruments) is subject to licensing requirements[1]. In addition, the Law on Currency Regulation provides that foreign currency exchange activities (i.e., engaging in the business of buying or selling foreign currencies) are subject to licensing requirement.
The Law on Currency Regulation provides a definition for foreign currencies. While it does not appear likely that cryptocurrencies fall within such definition, those engaging in such activities should consult with legal counsel.[2]
Azerbaijani Tax Code
Under the Azerbaijani Tax Code and general tax principles, revenue from trading or selling virtual currency is generally considered subject to taxation.
In 2018, Azerbaijan’s Central Bank issued a statement warning that cryptocurrency is a volatile instrument and urged the population to exercise caution in dealing with cryptocurrencies.[3]
Digital and Virtual Currencies
Virtual currencies are not legal tender in Azerbaijan. The 1995 Azerbaijan Constitution provides that the Azerbaijani manat is the official currency of Azerbaijan. The Constitution vest exclusive authority with the Central Bank of Azerbaijan to mint legal tender. Moreover, the Civil Code requires that contractual obligations be denominated in Azerbaijani manatees. [4]
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
Is cryptocurrency legal in Azerbaijan?
Do you have questions about cryptocurrency, digital currencies, or blockchain technology?
Freeman Law can help with digital currencies, tax planning, and tax compliance. Contact us now to schedule a consultation or call (214) 984-3410 to discuss your cryptocurrency and blockchain technology concerns.
[1] Law of the Republic of Azerbaijan ‘On Banks’, No. 590-IIQ, dated 16 January 2004, Republic of Azerbaijan Collection of Legislation 2004, No. 03, Item 130 (in Azerbaijani), Article 32.
[2] Law of the Republic of Azerbaijan ‘On Currency Regulation’, No. 910, dated 21 October 1994, Supreme Council of the Republic of Azerbaijan Information [Bulletin] 1995, No. 07, Item 116 (in Azerbaijani) (Law on Currency Regulation), Article 3.
[3] Head of the Central Bank of Azerbaijan Urged Population to Be More Careful with Cryptocurrencies, Sputnik Azerbaijan (Jan. 15, 2018), (in Russian), article archived at Perma.cc.
[4] Civil Code of the Republic of Azerbaijan, approved by Law of the Republic of Azerbaijan No. 779-IQ, dated 28 December 1999, Republic of Azerbaijan Collection of Legislation 2000, No. 04, Item 250 (in Azerbaijani), Article 439.1.
