Azerbaijan Cryptocurrency Regulations and Laws

Cryptocurrency legislation of the Republic of Azerbaijan should be analysed before engaging in any cryptocurrency-related activity (e.g., blockchain technology, cryptocurrency mining, etc.). At the outset, it must be noted that any person can engage in cryptocurrency mining. This, however, does not amount to recognition of cryptocurrency as a legal tender in Azerbaijan.

Blockchain technology and cryptocurrency remain widely unregulated in Azerbaijan. With that, the term “cryptocurrency” is mentioned once in the legislation within the “Regulations on Margin Trading”, approved by the Board of Directors of the Central Bank of the Republic of Azerbaijan. Article 7.2 of these Regulation reads: “the maximum amount of the credit provided by the investment company to its customers (except for institutional and professional investors) under the contract for difference (CFD) is determined as follows: … 7.2.4. 2:1 on CFDs whose underlying asset is cryptocurrency (digital currency).”

Thus, the term has no other mention in the legislation. Consequently, such a gap may facilitate abuse of existing laws. The most recent example of such misuse is the criminal case against B.H.R. and I.R.F., investigated by the State Security Service of the Republic of Azerbaijan. By the judgment of the Yasamal District Court, the individuals were found guilty of organising the unlawful covert transfer of particularly large amounts of funds from the Republic of Azerbaijan to a foreign country or from a foreign country to Azerbaijan and were sentenced to the respective penalties. The outcome of the case also included the special confiscation in favour of the state of 830 units of cryptocurrency held with “Binance”, a virtual asset service provider. This is presented as the first instance in Azerbaijani practice in which cryptocurrency has been confiscated in favour of the state.

This development makes it necessary to examine more closely the existing legal regime governing cryptocurrency in Azerbaijan and the mechanisms applicable to virtual assets.

Regulation of cryptocurrency in Azerbaijan

What is “virtual asset”?

As of August 2026, no separate and comprehensive law regulating cryptocurrency has yet entered into force in Azerbaijan. However, the broader concept of a “virtual asset” is already addressed in several legislative acts.

One of the key elements of the legal framework relevant to this concept is the Law of the Republic of Azerbaijan on Prevention of the Legalisation of Criminally Obtained Property and the Financing of Terrorism (hereinafter, the “Law”). Under the Law, which entered into force on 1 February 2023, a virtual asset is a digital representation of value that exists within a virtual asset circulation system and functions as a medium of exchange for payment or investment purposes. At the same time, digital representations of national and foreign currencies, securities and derivative financial instruments are not considered virtual assets. In addition to this definition, virtual asset service providers (hereinafter, “VASPs”) are included within the definition of financial institutions for the purposes of AML/CFT.

Initiatives of the Central Bank of the Republic of Azerbaijan regarding cryptocurrency

In connection with the Law, on 24 February 2023, the Management Board of the Central Bank of the Republic of Azerbaijan approved the “Rules on Conducting Transactions with Virtual Assets in the Republic of Azerbaijan” (hereinafter, the “Rules”). A significant part of the Rules is focused on AML/CFT requirements and targeted financial sanctions. Therefore, the Rules should not be considered a “full-fledged regime”. Moreover, the entry into force of the Rules is also conditional upon the adoption of normative legal acts regulating the activities of virtual asset service providers in the Republic of Azerbaijan.

One of the principal objectives of the Rules is to ensure the application of customer due diligence measures to transactions involving virtual assets and the identification of the parties to such transactions. During a transaction, a VASP must identify the identification details of the virtual asset owner and beneficiary, their account numbers or wallet addresses, as well as the unique reference number of the transaction.

In addition, the VASP initiating the transaction must verify certain information concerning the virtual asset owner prior to the transaction and carry out the relevant customer due diligence measures. At the same time, when establishing business relationships with other VASPs, VASPs must obtain information concerning their activities, reputation and control systems and conduct the relevant assessments.

This alone indicates that cryptocurrency-related activities, such as mining, trade, and investment, are permissible.

It should also be noted that on 29 June 2026, Fidan Tofidi, Director of the Financial Technologies and Innovations Department of the Central Bank, stated that the final version of the draft law on virtual assets and crypto markets had been prepared and submitted to the relevant state authorities. The law is expected to be adopted by the end of the year.

Taxation of cryptocurrency in Azerbaijan

Taxation of cryptocurrency activities varies depending on the circumstances. 

Accordingly, the following rules apply to non-entrepreneurial income of individuals derived from virtual assets:

• Pursuant to Article 99.3.8 of the Tax Code, any income other than wages, provided it reflects an increase in the initial value of a taxpayer’s assets, is classified as income derived from non-entrepreneurial activity upon the asset’s disposal. Under Article 101.2 of the Tax Code, annual income from non-entrepreneurial activity is taxed at a rate of 14 %. 
• Furthermore, individuals deriving income from non-entrepreneurial activity are required to pay income tax to the state budget by submitting an “Income Tax Declaration” to the tax authority no later than March 31 of the following year. 

Taxpayer obligations for legal entities are as follows:

• Corporate profit tax: Resident legal entities are subject to 20% profit tax on their taxable profit, i.e. income derived from cryptocurrency activities less deductible expenses.

Furthermore, the following tax applies to transactions with non-residents:

• Withholding Tax (WHT): When residents of the Republic of Azerbaijan transfer funds to an account created in an electronic wallet owned by a non-residents, the local payment service provider carrying out the transaction or the local branch of a foreign payment service provider withholds tax at the rate of 10% of the transferred amount, in accordance with Article 125.1-1 of the Tax Code.

Under the article 13.2.8 of the Tax Code, virtual assets are not considered goods for the purposes of Value Added Tax (VAT), therefore, transactions involving virtual assets are not subject to VAT.

It should be noted that transactions involving non-residents may be subject to a different tax treatment, depending on the applicable Double Taxation Agreement.

Disclaimer: This article should not be construed as legal advice or a legal opinion, and Caspian Legal Center assumes no liability for any damage resulting from actions taken in reliance on the information specified herein. For legal opinions, advice, and recommendations, please contact us at [email protected] or +99450 289 8973.

Last Update: 07.09.2026