Expert: The development of the cryptosector in Armenia is the key to the involvement of new players, the growth of the tax base and jobs  

ArmInfo.In the summer of 2022, the State Revenue Committee of the Republic of Armenia appealed to the Central Bank of the Republic of Armenia with a call to ensure the regulation of the cryptosector. Such a need, as noted then by head of the Committee Rustam Badasyan, arose due to cases of tax evasion in this field, money laundering and other risk factors.

Prior to this, the financial authorities of the country have repeatedly stated that in Armenia the cryptocurrency is in the gray zone, it isn't either prohibited or permitted. Years earlier, touching on this topic, the Regulator talked a lot about the risks, in particular those associated with the volatility of cryptocurrencies, technologies that identify a person, etc.

It is noteworthy that, despite the fact that there are no general rules of the game in the cryptosphere in Armenia yet, the number of users in the country is actively growing. As crypto-entrepreneur Andranik Toghramadzhian noted in an interview with ArmInfo correspondent, today the number of people involved in crypto-community in the country is up to 25 thousand. Participating with partners in the development of the first SkyLabs ATM installation enterprise in Armenia, Togramadzhian is confident that the country’s financial authorities will adopt a law regulating the sector in the coming year, which will ensure the arrival of large financial technology companies in Armenia, increase the tax base and the level of employment.

Not an immigrant, but a repatriate

“The decision to move to Armenia was more than conscious,” a young entrepreneur told ArmInfo correspondent. Like all representatives of the Diaspora, Toghramadzhian spent his entire conscious life thinking about moving to his historical homeland, although he was born and grew up in Russia. Having received an education, defended his Ph.D. thesis in historical sciences, and completed all the work processes in Russia, even before the well-known February events, Andranik Toghramadzhian had moved to Armenia, received citizenship and got involved in the business processes of Armenia in the field of cryptocurrency and blockchain.

Prior to SkyLabs in Armenia, he led projects related to real estate, IT, and mining. “Now I am working on the external component of cryptomats and the development of the network,” Toghramadzhian says.

In this regard, it should be noted that since the beginning of 2022, the number of active users of the SkyLabs crypto machines in Armenia has increased 8 times. Today SkyLabs has 6.4 thousand clients. “With the relocation of a large number of IT specialists to Armenia, the cryptosphere has become super popular here,” he noted. For 2023, the company has set itself the goal of doubling this figure.

Why do we need cryptocurrency in Armenia: what will the economy get, and why does an ordinary citizen need it?

Cryptocurrencies are something like a payment system, a means of payment. As the specialist says, they cannot give anything to the state by themselves. However, in the current situation in the country, with a large inflow and outflow of non-taxed funds in cryptocurrency, the state does not receive huge funds to the state treasury. “According to my calculations, the state loses and does not count taxes by about $20-25 million a year,” Toghramadzhian stressed.

He explained that the lion's share of these funds falls on betting (bets), part is the shadow turnover associated with weapons, drugs, etc. A certain share coming from the Russian market may influence the imposition of secondary sanctions. In addition, there are a large number of illegal exchange offices. That is why the cryptocurrency as a whole is treated negatively, and that is why, according to Andranik Toghramadzhian, the field needs to be regulated.

For an ordinary citizen, cryptocurrency can become an additional means of payment (including in electronic commerce) or an alternative to money transfers, which are so relevant in Armenia. As the young entrepreneur explained, individuals can reduce their costs by sending money transfers to their relatives in Armenia or from Armenia in cryptocurrency, since it is much cheaper than using the traditional transfer system.

In addition, today a fairly large number of people work in the digital sector, cooperate with foreign partners and receive wages in cryptocurrency. Therefore, the relevance in the regulation of this area is growing every day. If the sector is regulated, accordingly, Armenia will become an even more interesting place for outsourcing of large companies, including due to the availability of convenient payment methods.

“If we bring all processes to the proper level, the Armenian market will become attractive for many large institutional companies,” he noted. In this regard, Toghramadzhian said that last year the Binance Exchange, the world's largest cryptocurrency exchange  came to Armenia. “They received a license in Georgia, and they are also going to get it here. After that, they will open an office, generate more jobs. I'm sure other companies will follow Binance. I think that this is very important, and Armenia can make quite a big leap in this regard,” the founder of SkyLabs emphasized.

Regulation of the cryptosector: “Between two fires”

According to Toghramadzhian, the Central Bank of Armenia is pursuing a very competent monetary policy, maintaining the exchange rate of the dram. But at the same time, the entrepreneur notes that due to the close connection with the Russian Federation and the large financial volume, the position of Russia on this issue is also taken into account. Russia, according to him, is not very interested in the cryptosphere being regulated in Armenia, since there is no clear regulation in the Russian Federation either. At the same time, Toghramadzhian noted that there is also the position of Western countries and institutions that monitor the influx of virtual assets into the country and the subsequent processes. “Western partners are afraid that Russia can somehow take advantage of this, so they are calling for the regulation of the sector. And it turns out that our Central Bank is constantly “between two fires,” the specialist explained the situation.

He said that initially, when they turned to the Regulator (Central Bank) regarding the cryptosphere, it was noted that this is all “at the discretion of the banks, since there is no direct ban. “The banks said that this issue is the prerogative of the Central Bank,” Toghramadzhian recalls. The entrepreneur hopes that the Central Bank is already working on a draft law chaired by its head Martin Galstyan, which, in his opinion, will be adopted quite quickly, since the sphere is very lively, and at the same time, the opinion of business will be taken into account.

“We would be comfortable if the Regulator introduced a mechanism for non-cash purchase of cryptocurrency, so we could accept bank cards and cooperate with banks. In general, this is a good solution. It is likely that certain limits will be introduced for residents and non-residents. But we would not want such restrictions, since Armenia is a hospitable, tourist country, a large number of people come here. And we should be more open and focused not only on the people living here, but on tourists. It is important that the latter have the opportunity to make transactions with cryptocurrency with minimum limits, a minimum package of documents and for cash, as with ordinary purchases, when it is possible to purchase goods in cash that do not exceed 300,000 drams,” Toghramadzhian said. Then, in his opinion, Armenia will be able to be completely financially interesting. “Our task is to help as many people as possible to come to Armenia and spend a lot of money here. And we need to simplify this process ,” he stated.

For its part, SkyLabs intends to introduce mechanisms that ensure the transparency of processes, in particular KYC (Know Your Customer: standards used in the investment and financial services industry to verify customers and know their risk and financial profiles, ed. note) and AML (Anti-Money Laundering: a set of rules aimed at suppressing the laundering of illegally obtained funds by criminal or terrorist organizations, ed. note).

Pathfinders with far-reaching plans

There are a fairly large number of companies in Armenia that are engaged in blockchain development, wallet creation, and maintenance. In addition, betting companies interact with cryptocurrency, to which Toghramadzhian has a mixed attitude due to the social factor. In this vein, he explained that due to low incomes,  a quite a large number of people in Armenia try to acquire property by resorting to the so-called easy methods of enrichment,  in particular, betting. And in the case when they lose on bets, they lose their property, thereby aggravating an already difficult situation. Toghramadzhian noted that SkyLabs is the first and the only one in Armenia in terms of installing crypto-terminals, where you can conduct instant transactions with crypto assets.

To date, the company has already installed 7 cryptomats in Armenia, of which 6 in Yerevan and 1 in Gyumri. In addition, SkyLabs plans to expand towards Georgia and the UAE.

In particular, the entrepreneur said that cryptomats will be installed in Tbilisi this year. Thanks to this, customers will be able to buy cryptocurrency for Armenian drams, sell it in Tbilisi and receive Georgian lari. “We have already gone through the registration process, received a license, selected places, and we plan to transport all this to Georgia in the near future,” he said. In this regard, the founder of SkyLabs emphasized that the company plans to transform Armenia into an important crypto hub for many countries. “Our strategy in Armenia is long-term. We plan to establish a large ecosystem that will connect Armenia with a number of countries,” the businessman said.

Cryptocurrency volatility: Is the devil not so black as he is painted?

“Cryptocurrency is a very volatile segment, however, with proper preparation, many people can earn money on it, many people invest in this way,” Toghramadzhian assures.

According to him, quite often the volatility of cryptocurrencies is heavily extrapolated. “You can look at the volatility of Microsoft stocks, SNP500 and some other companies. Sometimes they fall very sharply. For example, in a short time, due to well-known events, the shares of Russian companies have fallen sharply. But they do not correlate with cryptocurrency,” the entrepreneur noted.

Toghramadzhian did not deny the fact that the cryptocurrency market is volatile, but at the same time emphasized that the classic investment market is no less volatile.

“This is simply due to the fact that the classic market exists longer, the trends are monitored for a longer period, while in the crypto market, a correspondingly shorter period. Without awareness, if you approach the classical investment market and invest certain funds, you can also lose everything,” he said.

The crypto market is open, so a large number of people make many mistakes. Whereas the classical investment market is more structured, articulated, censored and more familiar. “Accordingly, risks and volatility are slightly less. It's simple," Togramajyan explained.

SkyLabs is not a grocery store

“We do not have a goal to cover the whole of Armenia with our cryptomats. We approach this issue with absolutely no illusions. We must understand that we are not a grocery store. Crypto-community is a certain segment that we intend to lead, including by holding educational events, which we already started last year,” the entrepreneur shared.

The team looks forward to further intensive dialogue with the state and the development of information technology. After all, the next step of SkyLabs in Armenia will be the introduction of crypto acquiring, which will allow, as Togramajyan explained, to pay with cryptocurrency in stores and other outlets from the phone, to make payments through post-terminals. In the future, accepting payments in cryptocurrency for short-term rental housing.

“We hope that this area will help many people to earn money here. People will become wealthy, this will improve the situation and raise GDP per capita,” the specialist noted.

He drew attention to the fact that today's growth in a number of services is situational and is associated with the influx of a large number of people. Therefore, strategic plans and an appropriate legislative framework are needed to attract large companies to Armenia. “Imagine that these 100,000 foreigners (relocators – Ed.) leave tomorrow. And if we do not have time to adopt the relevant laws, to attract larger players, the economy will then decline. Therefore, we hope for the development of the sphere,” Toghramadzhian summed up.