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Central Bank of Azerbaijan Rules Out Issuing Cryptocurrency

Last Updated September 28, 2020 3:40 PM
David Hundeyin
Last Updated September 28, 2020 3:40 PM

The Central Bank of Azerbaijan (CBA) has indicated that it does not intend to issue a state-backed cryptocurrency, also known as a central bank digital currency (CBDC).

Speaking  to reporters in Baku on November 15, CBA first Chairman Alim Guliyev stated that the Bank treats cryptocurrencies conservatively, based on a belief that the use of digital currencies and similar financial instruments “comes with great risks”.

According to Guliyev, cryptocurrencies are often used for money laundering, which is a major reason why the CBA does not intend to launch a CBDC anytime soon. This comes some months after CBA Chairman Elman Rustamov issued a warning to the Azerbaijani population at large, urging them to exercise caution in dealing with “risky and dangerous” cryptocurrencies.

Global Opinion Split

The subject of state-backed cryptocurrencies continues to be a controversial one provoking conflicting responses -sometimes even from the same financial authorities. Guliyev’s proclamation came barely a few hours after IMF Chair Christine Lagarde made a speech at the Singapore Fintech Festival urging central banks around the world to consider. According to Lagarde, the issuance of CBDCs would potentially enhance payment security, reduce strain on the financial system by lowering the risk of bank runs and even provide financial inclusion to less privileged areas left underserved by existing financial infrastructure.

Despite Lagarde’s pronouncement however, the IMF is currently at odds with the Marshall Islands over the country’s plan to launch a sovereign cryptocurrency, threatening earlier this week that the launch of the proposed ‘SOV’ will lead to a closure of all international aid to the country.

On the one hand, several central banks continue to view cryptocurrencies with immense skepticism, with Australia, Israel and Hong Kong among others indicating that they have serious misgivings about any potential CBDC issuance, if not a complete lack of interest. In May, CCN.com reported that Hong Kong’s acting secretary for financial services and the treasury Joseph Chan stated that the Hong Kong Monetary Authority (HKMA) has no plans to issue a state-backed digital currency for now.

Later on in October, Michelle Bullock, Assistant Governor of the Reserve Bank of Australia stated that the bank not found any compelling reason to issue a digital version of the Australian Dollar. Earlier in November, the Bank of Israel also indicated in a report that it has not identified any potential benefits of issuing the so-called “Digital Shekel.”

On the other hand, a number of countries including Sweden, Singapore, Thailand, and Canada have enthusiastically embraced the concept of CBDCs, announcing plans to launch their own state-backed cryptocurrencies in the near future. In August, the Bank of Thailand announced the launch of its roadmap for ‘Project Inthanon’, its CBDC initiative. Sweden’s Riksbank on its part is expected to launch a pilot for the proposed e-Krona CBDC in 2019, with full implementation set for 2021.

Featured image from Shutterstock.