Azerbaijan Takes Cautious Approach to Cryptocurrency Regulation

As the world continues to evolve in 2024, Azerbaijan’s stance on cryptocurrency regulation reveals a delicate balance between caution and openness. The country’s legal framework surrounding cryptocurrencies is largely unregulated, yet it does not entirely disregard the concept.

Cryptocurrency Activities in Azerbaijan: A Permissible but Unregulated Domain

While cryptocurrency activities, including bitcoin mining, are permissible in Azerbaijan for both domestic and foreign entities, they do not qualify as legal tender within the country. The lack of specific laws or regulations governing this domain raises questions about the regulatory environment.

Key Legislation and Existing Laws

A closer look at existing Azerbaijani laws reveals alignment with several key legislation, including:

• Law on E-commerce: governs electronic transactions
• Law on Currency Regulation: regulates foreign exchange operations
• Law on the Securities Market: oversees securities trading
• Civil Code (Chapter 54): provides general principles for civil law

However, these laws primarily govern their respective areas and do not specifically regulate cryptocurrencies.

Taxation of Cryptocurrency Transactions

According to the Azerbaijani tax authority, cryptocurrency transactions are subject to taxation as e-commerce transactions. This indicates their recognition within the legal framework. If such activities were illegal, they would be taxed under provisions for illicit income rather than e-commerce transactions.

Taxes on Cryptocurrency Transactions in Azerbaijan

• Value Added Tax (VAT): applied on purchases from abroad
• Withholding Tax (WHT): deducted on transfers to non-resident e-purse accounts
• Profit Tax: applied on profits derived from cryptocurrency transactions

These taxes are directly deducted by banks during transaction processing.

Azerbaijan’s Cautious but Open Stance Towards Cryptocurrency

In summary, as of 2024, Azerbaijan presents a unique scenario where cryptocurrency activities are neither regulated by specific laws nor prohibited. This allows for involvement in cryptocurrency activities while adhering to existing legal and taxation frameworks, indicating a cautious but open stance towards emerging digital financial technologies.