BAKU, Azerbaijan, January 13. Digital currencies, which have no physical form and exist solely in electronic form, are already widely used around the world and have even gained legal status in some countries. These currencies can be exchanged via the internet, and in some cases, they may be centralized or decentralized, controlled through specialized networks. Centralized digital currencies are controlled by governments and central financial institutions and are typically managed as part of the official monetary policy. In contrast, decentralized currencies, such as Bitcoin and Ethereum, operate based on blockchain technology and are not subject to control by central authorities.
Digital currencies are increasingly used, especially for international payments and in modern payment systems. For example, cryptocurrencies like Bitcoin and Ethereum are integrated into global payment systems, and many online trading platforms accept them as a means of payment. In the global context, experiments on the centralization and legalization of digital currencies are already underway in China, North Korea, and some European countries, and they have already started to be used in some countries. In Azerbaijan, the Central Bank, as the regulatory body, is working on creating national standards based on international experience; however, at present, digital currencies do not have legal status in the country. Experts believe it is time to legalize digital currencies in Azerbaijan.
Commenting on the issue, the Director of Crypto Consulting LLC, head of the kriptoinvest.az portal, and a lecturer at the UNEC Business School, Elnur Guliyev noted that the rise in cryptocurrency prices over the past year has significantly increased the interest of corporate companies, amateur investors, and ordinary citizens in digital assets in Azerbaijan.
According to him, the increase in cryptocurrency prices has encouraged people to invest in this asset, as, despite the high level of risk, cryptocurrencies have become significantly more profitable compared to traditional financial instruments.
"At the moment, digital currencies in Azerbaijan do not have legal status. Income tax on cryptocurrency profits is paid on a voluntary basis, as there is no mechanism in the country to officially track cryptocurrency investments or transactions. Furthermore, cryptocurrencies are not recognized as assets or property under current legislation.
Thus, under the Tax Code, income earned by an Azerbaijani citizen from cryptocurrency transactions is considered income from non-entrepreneurial activities. In this case, the individual receiving the income is required to register with the tax authorities, obtain a tax identification number (TIN), and pay a 14 percent income tax," he added.
The expert emphasized that it is time to determine the legal status of digital assets in Azerbaijan and improve the relevant tax legislation.
"Based on the experience of developed countries in this area (Japan, Switzerland, the US, and Malta) and CIS countries (Ukraine, Belarus, Kazakhstan, and Georgia), a national regulation model can be developed. At the initial stage, it is possible to introduce a zero percent tax rate or other preferential measures for a specific period.
Determining the legal status of digital assets will positively impact the increase in financial literacy in our country, ensure employment, contribute to the development of the startup ecosystem, and stimulate the creation of new areas of activity, such as cryptocurrency mining, crypto exchanges, and local exchange services," he pointed out.
According to Guliyev, by the end of this year, digital currencies in Azerbaijan could be granted legal status.
"The Central Bank of Azerbaijan (CBA), which is the main body for regulating cryptocurrencies in the country, is currently working on creating national standards based on international practices. One of the first steps in this direction will be the introduction of a sandbox regime. This regime consists of a set of rules for testing innovative financial products in the financial sector under the supervision of the Central Bank.
Companies selected based on certain criteria will be able to offer their innovative products or services in test mode for a specified period (six months or one year). The CBA, analyzing the results, will adopt corresponding regulations within the framework of the country's legislation. The main goal is to create national standards without hindering technological and innovative development. I expect the relevant legislative acts to be adopted in the fourth quarter of 2025," he added.
The CBA, as the regulatory body, is actively analyzing the impact of CBDC (Central Bank Digital Currency) on the country's economy and monetary policy. For several years, the CBA has been closely cooperating with a number of central banks and international financial institutions, developing a conceptual approach to CBDC and studying international experience in this field. Two years ago, the CBA announced receiving technical assistance from the International Monetary Fund (IMF) to develop a conceptual approach to CBDC. These steps confirm that official structures are actively working on the introduction of digital currency in Azerbaijan, and this process is ongoing.
Economist Eldaniz Amirov said that in order to legalize digital currency, strategic plans must be defined in advance, and risks and opportunities should be assessed.
"To make digital currency accessible, the legal and regulatory framework must first be established. Also, the creation of the corresponding technological infrastructure is required. In addition, calculations need to be made to assess how much digital currencies can bring dividends to the country's economy in relation to the costs and resources spent on their creation, as well as determine their accessibility and effectiveness," he added.
According to the economist, even though digital currencies have already been introduced in some countries, their economic efficiency is often minimal or non-existent.
"For example, in some countries, work has been done to introduce digital currency, and although it does not cause problems in circulation, its economic efficiency is either absent or extremely low. Therefore, digital currency is more suitable for countries with developed economies and large global companies," he noted.
The economist added that the delayed introduction of digital currency in Azerbaijan will not lead to serious negative consequences for the country's economy or financial processes as a whole.
The Chairman of the "Promotion of Economic and Social Research" Public Association, economist-expert Eyyub Karimli, mentioned that digital currencies are fully circulating on certain online exchanges and platforms, where they are bought and sold as a product.
The economist pointed out that the use of digital currencies has already been legalized in countries such as Russia, Kazakhstan, and others.
According to Karimli, a cautious approach to digital currency in Azerbaijan is entirely justified.
"As an economist, I am not overly optimistic about the future of cryptocurrencies. Cryptocurrencies and digital money remain virtual, and if they are not backed by any country or responsible institution, with their value determined solely by supply and demand, their future raises questions. In this context, our country's cautious approach to digital currency is entirely justified, and the adoption of these currencies requires more extensive research," he emphasized.
Karimli also spoke about possible solutions for the legalization of digital currencies in Azerbaijan. He emphasized that more in-depth research, analysis, and forecasts are needed for their legalization.
"As practice shows, such financial instruments often fluctuate in price, which can lead to an uncontrollable situation and increase their risks," he noted.
Karimli expressed support for the functioning of digital currencies in financial markets, stating that they can be used for buying and selling transactions. However, in his opinion, the introduction of digital currencies as circulating means in the country is still premature.
"We can start implementing digital currencies, but it is important to closely monitor the developments in this field," he concluded.
Overall, digital currencies represent a dynamic and innovative area, both in centralized and decentralized forms. They are expected to impact not only the financial sector but also the economy, social structures, and legal systems.
