The State of Crypto Adoption in Armenia
Source: Envato
Armenia is making big moves towards cryptocurrency. The country is showing it's serious about embracing this new technology.
A great example is how they're letting companies set up crypto mining operations at power plants - one company called ECOS has been doing this since 2018 and recently made their operation even bigger.
The government is helping by creating special zones where crypto businesses can operate easily and get benefits.
The main aim of FEZ was to help attract and develop high technologies in the country (Armenia), and help blockchain and crypto startups, so specific beneficial conditions are applied to them.
What makes this interesting is that Armenia doesn't have strict rules about cryptocurrency - you can buy, sell, and use it freely. The Central Bank keeps an eye on things, but there aren't any special licenses needed.
This open approach, combined with the government's support, is helping more people get involved with crypto in Armenia. Looking at the numbers, we can see this growth by 2028, they expect about 171,000 people in Armenia to be using cryptocurrency in some way.
Right now, about 4.6% of people in Armenia are involved with crypto, and this could go up to 5.7% by 2028.
While Armenia's crypto market is much smaller than big players like the United States, it's growing steadily. They expect the market to grow by about 12% each year until 2028.
This shows that Armenia, though small, is becoming an interesting place for cryptocurrency development, especially for companies that want to mine crypto using the country's power plants and business-friendly rules.
Crypto Law In Armenia
Source: Envato
Armenia is still figuring out how to handle cryptocurrency in its laws. Right now, it's in a funny spot - crypto isn't illegal, but there aren't clear rules about it either.
Back in 2018, the Yelc bloc tried to make crypto mining officially legal and even wanted to make it tax-free until 2023, but the government wasn't too excited about this idea.
The situation gets tricky because different parts of the government have different opinions. The State Revenue Committee, which handles taxes, wants more control over crypto because right now they can't do much about crypto transactions - even when large amounts of regular money are turned into cryptocurrency.
The Central Bank of Armenia is watching crypto, but they haven't made any specific rules. Banks in Armenia are staying away from crypto because they're not sure how to handle things like knowing who's using the cryptocurrency.
What makes this even more complicated is that Armenia is part of a bigger group of countries (the Eurasian Economic Union), and in 2021, these countries couldn't agree on how to make crypto rules that would work for everyone.
We receive such proposals now and then, however at present the member states do not have a shared stance on the need to develop a uniform legal environment for digital assets, digital signs, and cryptocurrencies in the union, Iya Malkina said.
So for now, in Armenia, you can legally buy, sell, use, and keep cryptocurrency, but there aren't any special licenses or clear regulations. This creates a situation where crypto exists in a kind of grey area - it's allowed, but without clear rules, which can make things uncertain for businesses and users.
Government Regulations and Policies
Source: Envato
The Central Bank is getting more serious about controlling crypto. They're worried about several things: people losing their money, criminals using crypto for illegal activities, and making sure crypto companies play by the same rules as regular banks.
The Central Bank has some good reasons for wanting more control. They want to protect people's money, stop criminals from using crypto for illicit activities, and make sure Armenia follows international rules about financial safety.
In 2018, the Central Bank stated virtual assets, informing the public about the high risk and danger of transactions with them. With the increasing turnover of virtual assets in recent years, several related problems have become evident,
But this stricter approach is causing some problems. Since 2018, when the Central Bank first warned about crypto risks, many banks have become afraid to work with crypto companies. Some people who run crypto businesses are worried that too many rules might kill their industry in Armenia.
Right now, Armenia is trying to find a balance. They want to make crypto safer and follow international standards, but they also don't want to destroy the innovation that crypto brings.
Law enforcement is getting more involved too - they've already dealt with their first big crypto crime case and are working with international partners to fight crypto-related crimes.
The tricky part is that the same technology that makes crypto hard to track is also important for Armenia's plans to modernize its government services. So they need to be careful about how they regulate crypto without hurting the technology that could help the country grow.
Challenges to Crypto Adoption
Source: Envato
Cryptocurrency adoption in Armenia faces several significant challenges, despite the country’s cautious embrace of digital currencies. Here are some of the key issues:
Regulatory Environment
Armenia has been working on refining its legislative framework to accommodate cryptocurrencies, but the regulatory environment remains complex and evolving.
The government has established regulations to ensure investor protection, prevent financial crimes, and foster a stable digital currency environment.
However, the lack of a comprehensive, cryptocurrency-specific regulatory regime creates uncertainty for businesses and investors.
Cybersecurity Concerns
The rise in cryptocurrency use has brought about various cybersecurity challenges. Phishing attacks, malware, ransomware, and exchange hacks are significant threats.
Users and exchanges must implement robust security measures to protect their assets, but the prevalence of cyber threats can deter potential adopters.
Taxation and Legal Issues
While Armenia has made strides in establishing clear guidelines for the taxation of cryptocurrency transactions, the legal landscape is still developing. Ambiguities in tax laws and potential legal hurdles can create additional challenges for individuals and businesses looking to adopt cryptocurrencies.
Market Volatility
The inherent volatility of cryptocurrencies can be a significant deterrent. The fluctuating value of digital currencies can lead to substantial financial risks, making them less attractive to risk-averse individuals and businesses.
Potential Benefits of Crypto Adoption
Source: Envato
Cryptocurrency adoption in Armenia offers several potential benefits that could significantly impact the country’s economy and financial system. Here are some of the key advantages:
Economic Growth and Investment
Cryptocurrencies can attract foreign investment and stimulate economic growth. By positioning itself as a crypto-friendly nation, Armenia can draw in blockchain startups, investors, and tech companies looking for a supportive environment.
This influx of capital and innovation can create jobs, boost local businesses, and enhance the overall economy.
Tax Revenue
The government can generate additional tax revenue from cryptocurrency transactions and related activities. By implementing clear tax regulations, Armenia can ensure that it benefits from the growing crypto market while maintaining financial stability.
Improved Access to Capital
Cryptocurrencies and blockchain technology can provide new ways for businesses to raise capital. Initial Coin Offerings (ICOs) and Security Token Offerings (STOs) offer alternative fundraising methods that can be more accessible and efficient than traditional financing options.
Conclusion
Armenia's approach to cryptocurrency is a delicate balancing act between fostering innovation and ensuring financial stability.
While the country has taken strides to create a supportive environment for digital currencies, challenges such as regulatory uncertainty, cybersecurity risks, and market volatility persist.
However, the potential benefits of cryptocurrency adoption, including economic growth, increased tax revenue, and improved access to capital, make it a promising avenue for Armenia.
By carefully navigating these challenges and leveraging the opportunities presented by cryptocurrencies, Armenia can position itself as a leader in the global digital economy.
