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Compliance and Regulatory Issues in Finance in Armenia: A Catalyst for Digital Transformation

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The Central Bank of Armenia (CBA) has embarked on a significant journey towards digital transformation, which is expected to revolutionize the country’s financial markets and promote financial inclusion. As part of this strategy, Governor Martin Galstyan shares his insights on how compliance and regulatory issues will be addressed to ensure a seamless transition.

Digital Transformation: A Key Priority

The CBA recognizes that digital transformation is crucial for Armenia’s economic growth and development. By embracing digital technology, the country can leapfrog traditional barriers to entry and create new opportunities for financial services and products. The regulator is committed to creating an enabling environment that fosters innovation, competition, and financial inclusion.

Regulatory Framework: A Balancing Act

As the CBA works towards establishing a robust regulatory framework, it must strike a balance between promoting innovation and ensuring financial stability. To achieve this, the regulator is considering reforms to the existing legal framework, including the introduction of new licenses for FinTech players. This will enable “banking as a service” and “banking as a platform” business models, allowing commercial banks and FinTech companies to collaborate and drive growth.

National Electronic Identity System: A Key Enabler

The CBA is working with government and private sector stakeholders to develop a national electronic identity system, which will be an essential component of Armenia’s digital transformation. This system will enable citizens to access financial services and products seamlessly, while also enhancing anti-money laundering and combating the financing of terrorism procedures.

Data Infrastructure: A Catalyst for Efficiency

The regulator is investing in data infrastructure, including RegTech and SupTech, to facilitate end-to-end payments and financial services. These technologies will allow the CBA to collect big data sets in real-time, reducing compliance costs and freeing up resources for regulated entities to focus on business development.

Medium-Term Measures: Fostering Innovation

In addition to the enablers of transformation, the CBA is considering setting up a FinTech incubator to support startups and encourage innovation. The regulator is also exploring the introduction of a regulatory sandbox, which will provide a safe environment for FinTech companies to test new products and services.

Central Bank Digital Currency: A Potential Game-Changer

The CBA is also examining the potential benefits of introducing a central bank digital currency (CBDC). While there are various models and functions to consider, the regulator believes that CBDCs could play a crucial role in promoting financial inclusion and improving monetary policy. The CBA is committed to developing international technical standards for interoperability with other CBDC systems.

Conclusion

The digital transformation of Armenia’s financial markets presents significant opportunities for growth, innovation, and financial inclusion. However, it also poses challenges related to compliance and regulatory issues. By addressing these challenges head-on, the CBA aims to create a robust and enabling environment that fosters innovation, competition, and sustainable economic development. As the country continues on this journey, it is likely that Armenia will emerge as a leader in digital finance, with a reputation for regulatory excellence and innovative financial services.

Note: I’ve used headings (##) to separate sections, and bullet points (•) where necessary to make the text more readable.