General Regulations
In the modern financial market, the role of crypto-assets has been experiencing exponential growth. In response, crypto regulation in Armenia is evolving to ensure market stability, protect investors, and encourage innovation in the crypto space.
As of December 2024, the total market capitalization of global cryptocurrencies has reached approximately $3.91 trillion, marking an all-time high. This significant increase has been driven by several factors, including the approval of Bitcoin spot Exchange-Traded Funds (ETFs) in the United States, as well as favorable macroeconomic policies.
The Republic of Armenia, not remaining indifferent to the ongoing transformations in the financial sector and with the objective of maximizing consumer protection, has undertaken practical steps to regulate the market. In this regard, the Central Bank has introduced to the public the draft law “On Crypto-Assets.”
The draft law is aimed at regulating the types of activities carried out within the crypto-asset market of the Republic of Armenia, the procedures for providing services and engaging in such activities, as well as their oversight and regulation by the Central Bank. Furthermore, the draft law establishes liability for non-compliance with the prescribed legal requirements.
What types of crypto activities are regulated under the draft law?
The draft law regulates the following types of crypto-related activities:
- The public offering of –assets (Initial Coin Offerings – ICOs);
- The purchase and sale of crypto-assets (including authorization for trading on trading platforms);
- The requirements applicable to crypto-asset service providers;
- The licensing procedures for crypto-asset service providers.
Additionally, the draft law defines crypto-asset services, which include, but are not limited to:
- The operation of a crypto-asset trading platform;
- The custody of crypto-assets;
- The purchase and sale of crypto-assets on one’s own account;
- The purchase and sale of crypto-assets on behalf of a client;
- The receipt and transmission of orders related to crypto-asset transactions;
- The placement of crypto-assets;
- The management of crypto-asset portfolios;
- The provision of consulting services related to crypto-assets;
- The transfer of crypto-assets;
- The issuance of asset-backed tokens.
Crypto-asset service providers are considered to be joint-stock or limited liability companies (LLC) that have obtained a license from the Central Bank of Armenia to provide crypto-asset services within the territory of Armenia.
The only exceptions to this rule are banks, investment firms, payment and settlement organizations, investment fund managers, regulated market operators, and the central depository. These entities do not require additional licensing for certain services but must obtain permission in accordance with established procedures. However, the Central Bank may impose additional operational requirements on them.
The licensing procedure and the list of required documents are detailed in the draft law.
It should also be taken into account that the regulations of the law do not apply to crypto assets that:
- Are inherently unique and non-fungible (NFTs);
- Are technically non-transferable or are legally or contractually restricted from being transferred to another person;
- Have been issued by central banks or other similar competent authorities (CBDCs).
Why are the new regulations a positive step towards Armenia becoming a crypto hub?
The new regulations on crypto-assets in Armenia are an important step towards the country becoming a crypto hub, creating a trustworthy and predictable environment for international investors. With the implementation of the law, both investors’ interests and the interests of the general public will be protected. This, in turn, will promote innovation and entrepreneurship in blockchain and Web3 technologies. Moreover, compliance with international standards ensures Armenia’s competitiveness as a jurisdiction with crypto regulations and a favorable environment for entrepreneurial activities.
What are the applicable tax regulations governing crypto-assets?
The draft law also includes a package of amendments to related laws, including the Armenian Tax Code, which foresees the establishment of taxation mechanisms for –assets. In the package, crypto-assets are classified as property under the Civil Code, but there is still no tax base or rate for either individuals or legal entities.
In addition, in June 2024, the State Revenue Committee (SRC) announced that it would acquire the American Chainalysis software package to monitor transactions involving crypto-assets (also based on blockchain technology). A budget of 85 million AMD has been allocated for this purpose. A decision was made by the government regarding this. The software package will not only monitor the movement of financial resources within the crypto world but also transactions involving converting financial assets into crypto-assets and vice versa. This will help uncover cases of concealing and “laundering” illicit income through crypto-assets.
What AML regulations are established?
Given that crypto-asset transactions, due to their inherently anonymous nature, may present risks associated with money laundering and the financing of terrorism, it is also envisaged to implement a specialized framework within the scope of the “Anti-Money Laundering and Countering the Financing of Terrorism” law. This is aimed at safeguarding the broader public from becoming victims or, more critically, accomplices of such illicit activities.
How can we assist you in establishing your business in Armenia?
As a law firm, we can support the establishment and development of your business in Armenia. We offer company registration, preparation and submission of necessary documentation for licensing to the relevant authorities, drafting contracts, and ensuring regulatory compliance. We can also assist with tax planning, employee recruitment, employment contracts, and obtaining the necessary work and residence permits.
MB Legal offers comprehensive legal support and consultancy regarding the new crypto regulation.
