Bank of Armenia Governor calls for pragmatism regarding cryptocurrency

Banks should learn to manage the risks and thus make crypto services more accessible, the head of Armenia’s monetary authority has suggested.

Speaking in the country’s parliament, the executive urged the adoption of a pragmatic approach to regulation in order to ensure innovation goes hand-in-hand with financial security.

Governor calls for pragmatism regarding cryptocurrency

Crypto assets pose serious risks, including use in financing shadow activities or illegal operations, the Chairman of the Central Bank of Armenia (CBA), Martin Galstyan, acknowledged at a meeting with members of the National Assembly, the country’s legislature.

Quoted by the ARKA news agency and Sputnik Armenia, Galstyan elaborated that as cryptocurrencies are based on new technologies, they inherently carry significant risks, such as the potential to conceal financial flows for illicit purposes.

At the same time, the Caucasian nation’s top banker emphasized that a pragmatic strategy is essential in order to successfully reduce these risks.

During the meeting, he was asked by a deputy whether the central bank trusts cryptocurrencies and what future it envisions for them in Armenia.

“There is a misconception that terms like crypto assets, innovation, and artificial intelligence all mix together in one basket, when in reality they are different phenomena, requiring different approaches,” he pointed out, also stating:

“I believe we should avoid being excessively optimistic or pessimistic. Instead, we must adopt a pragmatic stance and comprehend how to manage the situation effectively, balancing innovation and development with the necessary risk mitigation strategies.”

Galstyan reminded lawmakers that under the legislation they have adopted, the CBA is tasked to develop a regulatory framework for entities and persons involved in crypto-related activities.

The governor also remarked that the CBA is dealing with institutions, not individuals, stressing that commercial banks remain responsible for relations with customers and companies.

Responding to a question about whether Armenian banks would work with crypto holders, Galstyan said this depends on each organization’s risk tolerance and a client’s ability to prove the origin of their assets. He further explained:

“If crypto flows into the banking system and we have no idea where it came from — for instance, whether it was generated by missile sales in Syria or child organ trafficking in Ukraine — then how could a bank take on that risk?”

They must learn, in the banking sector, to rationally manage this kind of risk, Galstyan insisted, adding that this will make crypto services more accessible and viable in the future.

Armenia’s central bank is working on comprehensive crypto regulations

The government in Yerevan approved a bill to regulate crypto activities in February of this year. The draft was submitted to the parliament in April and adopted by its members at the end of May. The law “On Crypto Assets” went into force on July 4.

The legislation outlines rules for crypto trading, the provision of related services, and market oversight, while aiming to protect the rights of investors and boost confidence in the industry.

It requires platforms processing cryptocurrency transactions, such as exchanges, as well as issuers of digital assets like stablecoins to disclose detailed information about their owners and meet a minimum capital threshold.

In April, Deputy Chairman of the CBA Armen Nurbekyan described the focus on ownership and capital oversight as a mechanism to ensure “financial hygiene” in the sector.

In its initial version, the law allowed banks to offer crypto services directly, but eventually, lawmakers decided to oblige them to establish a separate entity and obtain a special license from the central bank if they wanted to do so.

More relaxed rules were introduced for investment consultancies, but Nurbekyan warned that the regulator will be very strict in cases where businesses are responsible for client accounts.

The monetary authority is now engaged in preparing the necessary by-laws and has already put out a draft regulation for public consultations, the Armenian news outlets noted.

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