Armenia starts regulating crypto asset sector

ArmInfo."We are making the first attempt to regulate the crypto currency  sector. It will not be  ideal, but it is an important step," Prime Minister Nikol Pashinyan said on February 27 at a regular Cabinet meeting of the Government, after Finance Minister Vahe Hovhannisyan presented a package of bills  on amendments and additions to the law "On Crypto Assets" and a number of related laws.

According to Hovhannisyan, the growth of the  crypto assets sector has seen a notable increase in public  involvement in many countries, including Armenia. However, the lack  of a regulatory framework has resulted in legal issues related to  offering services involving crypto assets, engaging government  agencies, and establishing long-term and stable relationships with  clients and investors.

The Minister highlighted that along with the growth the crypto asset  sector, various risks have emerged,.  They are largely due to the  lack of adequate mechanisms in place  to safeguard clients interests  and the potential misuse  of crypto assets and their  underlying  technologies for illicit activities like money laundering and  terrorist financing. Moreover, the increasing volume of crypto asset  transactions poses risks to financial stability. Failing to address  these risks hinders the development of the sector, as it limits   client acquisition, service quality, investment opportunities in new  crypto assets. Additionally, it impedes the integration and  collaboration between the crypto ecosystem and the financial system. 

As a result of adopting the project package, a clear regulatory  framework will be established in the crypto- asset sector. This  framework will define rights and obligations of entities operating in  the sector, provide mechanisms to protect client interests, and  ensure transparent market operations. The regulation will also create  a clear legal framework for crypto-assets and their underlying  technologies, fostering development and innovation (in distributed  ledger technologies). It will set clear rules of the game for  entities  in the sector, laying the foundation for long-term planning  related to crypto-assets in the Republic of Armenia.  Hovhannisyan  emphasized that this will attract international players to the  sector.

Additionally, he highlighted the importance of creating effective  mechanisms to protect the interests of clients, including procedures  for preventing conflicts of interest, receiving and addressing  complaints and claims from clients, safeguarding clients' funds,  establishing rules of conduct, publishing necessary information and  meeting other requirements to ensure transparency. Clients will have  access to professional services, receive essential information for  decision-making, contact the financial ombudsman if needed, and use  other available opportunities to protect their interests.  Under the  regulation, the Central Bank of Armenia will be able to receive the  necessary information on sector activities, respond appropriately to  financial stability, combat money laundering and terrorist financing,  and address other risks. The Bank will also cooperate with regulatory  and supervisory authorities of other countries, and international  organizations, ultimately enhancing the country's reputation.