Cryptocurrencies in Azerbaijan: Opportunities and challenges - INTERVIEW

Cryptocurrencies have been steadily gaining traction in Azerbaijan, with the number of cryptocurrency users in the country reaching 120,000. In 2023, the volume of virtual assets in Azerbaijan amounted to $4.4 billion.

While the Central Bank of Azerbaijan has stated it has no immediate plans to issue its own central bank digital currency, cryptocurrencies like Bitcoin and Ethereum are increasingly being used for online transactions and investments.

Given the growing relevance of this topic, News.az reached out to Professor Elshad Mammadov, a Doctor of Economic Sciences , to explore Azerbaijan's approach to cryptocurrencies and digital assets.



- What is the growth dynamic of interest in digital currencies in Azerbaijan?

- Interest in cryptocurrencies in Azerbaijan remains relatively low, and I believe this is a reasonable outcome. In the current context, embracing cryptocurrencies often translates to capital outflow, which carries substantial risks.

Our primary focus should be on channeling investments into the local market, especially considering Azerbaijan's acute investment shortage. Many investors remain cautious due to two key factors: the high risks associated with cryptocurrencies and the limited financial resources of most Azerbaijani investors. This market requires significant capital, which not all investors can afford.

- How does the Azerbaijani government approach blockchain technologies and digital asset development?

- Azerbaijan’s efforts should prioritize the development of blockchain technologies over cryptocurrencies. Blockchain has the potential to enhance business transparency, ensure funds are allocated appropriately, and establish effective, fast, and flexible mechanisms.

From this perspective, blockchain technologies should be a cornerstone of digital transformation strategies. Government agencies and experts must concentrate on this avenue rather than promoting the use of cryptocurrencies.

- Does the Central Bank of Azerbaijan plan to issue a digital national currency? Are there ongoing projects or discussions in this regard?

- The possibility of introducing a digital manat is a significant topic of discussion and requires careful deliberation. Whether in digital or traditional form, the manat and the broader banking sector must ultimately serve to increase investments.

Digitalization efforts should align with the country’s economic priorities, such as boosting investments and developing the real sector. If these objectives are not met, the mere introduction of a digital currency will not yield meaningful outcomes.

- How could the development of cryptocurrencies impact Azerbaijan's financial and economic system?

- Azerbaijan must leverage digitalization, particularly blockchain technologies, to drive investment growth. Increasing capital investment and its ratio to GDP is essential for sustainable economic development. Digital technologies in the financial sector should focus on achieving these objectives.

- What are the main risks and challenges related to cryptocurrencies in Azerbaijan?

- The risks associated with cryptocurrencies in Azerbaijan are evident. Cryptocurrencies remain a high-risk venture due to the absence of effective insurance mechanisms—either by the government or the private sector.

This lack of protection exposes investors to the potential loss of a significant portion—or even the entirety—of their investments. Both investors and government agencies must carefully consider these risks when making decisions regarding the cryptocurrency market.

News.Az