Azerbaijan

**Report on the Current Status of Retail Cryptocurrency Trading in Azerbaijan**

**Date:** 2025-12-12

**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.

**1. Identified Current Status:**
Allowed-Unregulated

**2. Detailed Narrative Explanation:**
As of December 2025, retail cryptocurrency trading in Azerbaijan is best described as "Allowed-Unregulated." This classification means that individuals are free to engage in buying, selling, and holding cryptocurrencies, as there is no legal prohibition against these activities. However, Azerbaijan lacks a specific, comprehensive, and enacted legal framework dedicated to regulating cryptocurrencies or Virtual Asset Service Providers (VASPs).

The Azerbaijani manat is the sole legal tender, as mandated by the Constitution and Civil Code, which explicitly exclude cryptocurrencies from this status. Consequently, using crypto for direct payments for goods and services is not officially supported, though private transactions are not criminalized.

The regulatory approach is characterized by the application of existing general laws. The **Azerbaijani Tax Code** is actively enforced, requiring individuals and entities to declare and pay taxes on profits from cryptocurrency trading. The **Law on the Prevention of the Legalization of Criminally Obtained Funds or the Financing of Terrorism (2023)** establishes AML/CFT obligations, requiring reporting of suspicious transactions, which extends to virtual assets. A notable specific reference exists in the Central Bank's **Regulations on Margin Trading**, which defines cryptocurrency as a 'digital currency' for setting leverage limits on crypto CFDs.

The **Central Bank of Azerbaijan (CBA)** is the primary financial regulator. It maintains a historically cautious public stance, having issued warnings about the volatility and risks of cryptocurrencies. However, the CBA is actively working on developing a future regulatory regime. It has established a 'Special Regulatory Regime' or regulatory sandbox. The first phase of testing in this sandbox concluded in August 2025, successfully piloting integrations like that between Pasha Pay's m10 application and the Binance platform. Furthermore, the CBA is drafting a comprehensive "Law on Virtual Assets," which was reported to be in development throughout 2025. Until this law is enacted and a permanent licensing system is established, the market operates without crypto-specific regulation.

In practice, Azerbaijani residents can and do access international cryptocurrency exchanges. Local banks do not offer crypto-related services and may scrutinize transfers to crypto exchanges, but such transfers are not banned. The government's current strategy is one of cautious exploration, allowing activity while building a regulatory framework, which solidifies the 'Allowed-Unregulated' status.

**3. Specific, Relevant Text Excerpts:**
*   **Freeman Law:** "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."
*   **Caspian Legal Center (2022):** "no prohibition exists regarding the trade in cryptocurrencies via the internet."
*   **News.az (Sep 2024):** "Nevertheless, Azerbaijani citizens can own cryptocurrencies. They can purchase them online and use them through international online stores. Currently, there are no restrictions on this."
*   **Central Bank of Azerbaijan (Aug 2025):** "The Central Bank... has completed the testing period of innovative products selected under the first stage of the regulatory sandbox regime... Integration of Pasha Pay LLC's m10 application into the Binance platform."
*   **Azerbaijan Tax Code:** "Buying cryptocurrencies from abroad as e-commerce is considered taxable operations for VAT purposes according to article 169.3 of the Tax Code."
*   **Regulations on Margin Trading (CBA):** Explicitly defines cryptocurrency as a 'digital currency' for setting CFD leverage limits.
*   **FATF/MONEYVAL Report (2023):** "FIs [Financial Institutions] do not sell or buy crypto-assets, and do not currently offer crypto-asset-denominated investment products or crypto-asset custody services."