Crypto Regulations in Armenia
Armenia is a crypto-friendly country where many global crypto services are available, blockchain development and crypto mining have government support, and crypto terminals are seen on central streets. However, there is no regulatory certainty in the country yet.
Crypto is in the gray zone in Armenia: it’s neither banned nor allowed by law. The development of a regulatory framework is underway. In late 2023, Martin Galstyan, the president of the Central Bank of Armenia (CBA), announced plans to introduce cryptocurrency legislation to the National Assembly in the coming months. He said the framework would be based on global best practices for crypto market regulations.
Why a Regulatory Framework Will be Beneficial for the Armenian Crypto Industry
In Armenia, like in other countries, cryptocurrencies don’t fall into a standard asset category group due to their blockchain-based nature and unique characteristics. As a new asset class, crypto needs a comprehensive legislative framework to define the licensing process for companies, specify what services they are allowed to provide, ensure user rights and usage guidelines, and establish legal protections for all participants. Having certain market rules will make Armenia a more attractive place for crypto businesses to run their operations.
The lack of crypto regulations is often associated with possible negative impacts. In 2018, the Central Bank of Armenia published a statement on crypto assets where it listed the possible risks of crypto.
- Cryptocurrencies are lacking security and are extremely unstable
- In most schemes that use cryptocurrencies, there are no legally responsible entities
- Transactions executed with cryptocurrencies can often be part of the money laundering and terrorist financing schemes, as they allow anonymous and cross-border transactions, the return of which cannot be secured
- In cases of fraud, and criminal distortions in information security, authentic mechanisms to protect the legitimate interests of clients or to compensate for their losses are not in place, as a result of which the consumers’ interests may be violated.
Crypto Mining in Armenia
Crypto mining in Armenia is out of the Central Bank’s regulatory scope. According to the institution:
The creation and extraction (mining) of cryptocurrencies, is beyond the regulatory and supervisory competence of the Central Bank of Armenia and is viewed as part of an IT industry.
Individuals and corporate entities are allowed to set up mining facilities and mine cryptocurrencies.
The Armenian government supports the development of blockchain technology in the country. In 2017, a committee on blockchain technologies was created to study the potential of blockchain in different sectors.
In 2018, the government signed an agreement with the ECOS company to create a Free Economic Zone for growing digital technologies like blockchain and AI.
Companies within the ECOS Zone receive tax benefits and access to digital infrastructure for communication and hiring purposes.
For miners, Armenia can be an attractive place due to government support, free economic zones, alternative energy sources, and lower electricity costs compared to many other countries, including Spain, Belgium, Italy, France, Denmark, the US, and others.
Armenia’s largest mining farm was opened in the ECOS zone as a result of collaboration between major Armenian conglomerate Multi Group and international blockchain infrastructure provider Omnia Tech in October 2018. According to local media, around $50M was invested in the project. The ECOS mining farm is located at a hydroelectric plant on the Hrazdan River and uses hydroelectric power for crypto-mining operations.
ECOS data center at Hrazdan power plant. Source: ecos.am
Initially, the mining center included 3000 machines. In 2022, ECOS expanded its operations by launching a new data center equipped with devices from Bitmain, a leading mining hardware manufacturer. Based on the ECOS website, to date, the data center has more than 20,000 devices and supports an energy infrastructure of 60 MW, capable of expansion to 200 MW. ECOS is among the top cloud mining providers. The farm’s other services include miner hosting and miner rental.
What Will Be the Future of Crypto in Armenia?
The expected regulatory framework by the Central Bank will bring clarity to the market. Overall, Armenia supports the growth of blockchain technology development, but the status of cryptocurrencies remains uncertain. At the same time, the CBA is exploring the concept of Central Bank National Currency. In a 2023 publication, the bank mentioned that it identified limited use cases for a national digital currency, but noted that the technology could be useful in financial markets.
Anahit Avetisyan
Author
Web3 writer and crypto HODLer with a keen interest in market trends and recent technologies.
