Azerbaijan

Okay, here is the comprehensive report on the current status of retail cryptocurrency trading in Azerbaijan, structured as requested.

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**Report: Retail Cryptocurrency Trading Status in Azerbaijan**

**Date:** April 12, 2025

**Topic: Retail_Trading_Status**

**Description:** Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

**1. Current Status:** `Allowed-UnRegulated`

**2. Detailed Narrative Explanation:**

The status of retail cryptocurrency trading in Azerbaijan is best described as `Allowed-UnRegulated`. Currently, there are no specific laws or comprehensive regulations in Azerbaijan that explicitly prohibit individual citizens and residents from buying, selling, holding, or mining cryptocurrencies. Activities like trading via online platforms (often international) and mining are not legally banned.

However, this allowance exists within a regulatory vacuum. Cryptocurrencies are not recognized as legal tender in Azerbaijan; the Azerbaijani Manat remains the sole official currency as mandated by the Constitution and the Civil Code [3, 4]. The Central Bank of Azerbaijan (CBA) has adopted a cautious stance, issuing warnings about the volatility and risks associated with cryptocurrencies [3, 10] and advising the public to be careful [15]. While the CBA is exploring blockchain technology and the potential circulation of virtual currencies as part of its monetary policy studies [2, 9], it has not moved to formally legalize or integrate cryptocurrencies into the mainstream financial system [5, 9].

Despite the lack of specific crypto-focused legislation, certain existing regulations may indirectly apply or indicate governmental awareness:
*   **Taxation:** Income or capital gains derived from cryptocurrency trading or mining are generally considered taxable under the Azerbaijani Tax Code [3, 4, 16]. Tax authorities classify cryptocurrencies as "intangible assets" for tax purposes [16]. Taxpayers are expected to report these transactions [16].
*   **AML/CFT:** While there are no crypto-specific Anti-Money Laundering (AML) or Counter-Terrorist Financing (CFT) rules, Azerbaijan has general AML/CFT laws and regulations overseen by bodies like the Financial Monitoring Service (FMS-AZ) and the Central Bank [18]. Financial institutions and potentially other service providers involved in transactions that could touch crypto assets would be expected to adhere to standard Customer Due Diligence (CDD), Know Your Customer (KYC), and suspicious transaction reporting (STR) requirements [18]. Some KYC/AML solution providers explicitly offer services tailored for Azerbaijan, including crypto AML checks, indicating an expectation of compliance in the financial sector [6, 13, 17, 20]. In April 2023, specific "Rules for transactions with virtual assets" were approved, aimed at minimizing money laundering risks, but these rules reportedly do not define virtual currencies broadly or regulate the specifics of crypto transactions [12].
*   **Financial Services Laws:** Existing laws like the Banking Law (requiring licenses for money transmission) and the Law on Currency Regulation (requiring licenses for foreign currency exchange) might theoretically apply depending on how crypto activities are structured, though sources suggest cryptocurrencies likely don't fall under the definition of foreign currency [3]. One specific regulation approved by the CBA, the "Regulations on margin trading," explicitly mentions cryptocurrency as a potential underlying asset for Contracts for Difference (CFDs), setting a maximum leverage limit, indicating acknowledgement within certain financial instruments [4].

Recent reports (late 2024) indicate ongoing discussions and research regarding potential future regulation [2, 9, 11]. The CBA Chairman has stated that regulation in this area is needed [11]. However, as of early 2025, a dedicated legal framework governing cryptocurrency exchanges, consumer protection specific to crypto assets, or licensing requirements for crypto service providers does not exist [2, 3, 4, 14]. Therefore, while individuals are free to engage with cryptocurrencies, they do so without specific regulatory oversight or protections tailored to this asset class.

**3. Relevant Text Excerpts:**

*   **On Lack of Specific Regulation & Prohibition:**
    *   "However, in Azerbaijan, there is no legal framework governing the cryptocurrency market, and current legislation does not officially support the circulation of virtual money." (Source: AzerNews, Sep 2024) [2]
    *   "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." (Source: Freeman Law) [3]
    *   "...although bitcoin mining or any other cryptocurrency activity is not regulated by Cryptocurrency laws in Azerbaijan, such activity is not prohibited by any law of the Republic of Azerbaijan and is not accepted as a means of legal tender. Moreover, no prohibition exists regarding the trade in cryptocurrencies via the internet." (Source: Caspian Legal Center, Jul 2022) [4]
    *   "The question that torments many: is it possible to use cryptocurrencies in Azerbaijan? The answer is not so clear-cut. There is no ban, but there is no regulation either." (Source: Binance Square / Bit-Cryptous, Sep 2024) [5]
    *   "...to date there is no specific regulation of virtual currencies in Azerbaijan." (Source: Dentons / Law Business Research Ltd, 2018) [14]

*   **On Legal Tender Status:**
    *   "Virtual currencies are not legal tender in Azerbaijan. The 1995 Azerbaijan Constitution provides that the Azerbaijani manat is the official currency of Azerbaijan." (Source: Freeman Law) [3]
    *   "Cryptocurrencies are legal, although there is no specific legislation dealing with cryptocurrencies... They are not legal tender and are not accepted currency." (Source: Legal Advice, Specialist Investigations - Regulation Tracker) [15]

*   **On Central Bank Stance & Warnings:**
    *   "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." (Source: Freeman Law) [3]
    *   "The Central Bank of Azerbaijan looks at cryptocurrencies a little askance. They believe that this is a risky business - these bitcoins are too volatile, and scammers are not asleep." (Source: Binance Square / Bit-Cryptous, Sep 2024) [5]
    *   "On February 12, 2018, the chairman of the board of Azerbaijan's Central Bank, Elman Rustamov, stated that cryptocurrency is a very volatile instrument and urged the population to be more careful in dealing with cryptocurrencies." (Source: Library of Congress, citing 2018 reports) [10]
    *   "The Chairman of the Central Bank of Azerbaijan, Taleh Kazimov, said... 'We know that currently cryptocurrencies are bought and sold in Azerbaijan. I think that there should be regulation in this area...'" (Source: Apa.az, Jul 2024) [11]

*   **On Taxation:**
    *   "Under the Azerbaijani Tax Code and general tax principles, revenue from trading or selling virtual currency is generally considered subject to taxation." (Source: Freeman Law) [3]
    *   "The Azerbaijani tax authorities have classified cryptocurrencies as intangible assets... Gains from the sale of cryptocurrencies are subject to capital gains tax... Income from mining cryptocurrencies is subject to income tax." (Source: Heavnn University, Mar 2024) [16]

*   **On Individual Activity:**
    *   "Nevertheless, Azerbaijani citizens can own cryptocurrencies. They can purchase