Crypto-funded debit card in Armenia

Lack of Specific Legislation: There is no dedicated law in Armenia regulating virtual assets or stipulating licensing requirements for crypto businesses. This creates a significant degree of legal uncertainty for operators.

Central Bank's Stance: The Central Bank of Armenia (CBA) has consistently maintained a cautious and conservative stance on cryptocurrencies. It has issued warnings to the public about the high risks associated with virtual assets, emphasizing that cryptocurrencies are not legal tender in Armenia and are not regulated or supervised by the CBA. They do not recognize cryptocurrencies as a form of electronic money, payment instrument, or security.

Payment System Regulations: If a crypto-related service involves the processing of fiat currency (e.g., converting AMD to crypto or vice versa), it may inadvertently trigger requirements under the Law on Payment and Settlement Systems and Payment Organizations, potentially requiring a license for a payment organization or payment system operator from the CBA.

Law on Payment and Settlement Systems and Payment Organizations (Armenian): https://www.cba.am/AM/laws/gorc_bn/pay_sys.pdf (PDF in Armenian)

Fiat-to-Crypto / Crypto-to-Fiat: If these activities are deemed by the CBA to fall under money transmission, currency exchange, or payment services, then a license for a payment organization or a foreign currency exchange office might be required. However, the CBA has not explicitly applied these existing licenses to cryptocurrency operations.

Direct Fines: Not a simple "penalty amount" like a regulatory fine. These are criminal cases. Penalties typically involve arrests, pre-trial detention, asset freezes/seizures (often multi-million dollar amounts in various currencies and cryptocurrencies), and eventual criminal conviction leading to significant prison sentences and restitution orders.

Regulator/Enforcement Body: Investigative Committee of Armenia, Prosecutor General's Office of Armenia, often in cooperation with law enforcement agencies from other countries (e.g., Russia, Georgia, US).

Specifics: This law, originally adopted in 2004, has undergone several amendments. Crucially, amendments in 2022 specifically brought virtual asset service providers (VASPs) within the scope of obligated entities. This means VASPs are now subject to the same AML/CFT obligations as traditional financial institutions.

Law of the Republic of Armenia on Combating Money Laundering and Terrorist Financing (ՀՀ օրենքը «Փողերի լվացման և ահաբեկչության ֆինանսավորման դեմ պայքարի մասին»): This is the primary legislation. It mandates financial institutions, including VASPs, to implement robust AML/CFT measures, which inherently include sanctions screening.

Identification and Verification of Identity:

Individuals: Obtain and verify the customer's full name, date of birth, place of birth, nationality, residential address, and unique identification number (e.g., passport, national ID card details). Verification typically requires reliable, independent source documents, data, or information.

Legal Entities: Obtain and verify the legal entity's name, legal form, address of registered office, registration number, and the names of individuals authorized to act on behalf of the entity.

Beneficial Ownership: Identify and take reasonable measures to verify the identity of the beneficial owner(s) of the customer, especially for legal entities and complex structures. This includes understanding the ownership and control structure.

Purpose and Nature of the Business Relationship: Understand the purpose and intended nature of the business relationship or transaction.

Source of Funds/Wealth: For higher-risk customers or transactions, VASPs may be required to ascertain the source of funds or source of wealth involved.

Ongoing Monitoring: Continuously monitor the business relationship and transactions undertaken by the customer to ensure they are consistent with the VASP's knowledge of the customer, their business, and risk profile. This includes reviewing transactions for unusual patterns and ensuring documents, data, or information collected under the CDD process remain current and relevant.

Politically Exposed Persons (PEPs): Implement enhanced due diligence measures for customers identified as PEPs, their family members, and close associates.

Sanctions Screening: Screen customers and transactions against national and international sanctions lists.

Risk-Based Approach: Apply CDD measures according to the level of risk identified for each customer or transaction. This means higher-risk customers or transactions will require Enhanced Due Diligence (EDD), while lower-risk ones may permit Simplified Due Diligence (SDD) under specific conditions.

Reporting Obligation: If a VASP knows, suspects, or has reasonable grounds to suspect that funds, virtual assets, or other assets are the proceeds of a criminal activity, or are related to terrorist financing, it must immediately file a Suspicious Transaction Report (STR) with the Financial Monitoring Center (FMC) of the CBA.

No Tipping-Off: VASPs and their employees are prohibited from disclosing to the customer or to third parties that an STR has been filed or that an AML/CFT investigation is being conducted (the "no tipping-off" rule).

Period: Records related to customer identification data, beneficial ownership information, transaction data (including virtual asset addresses, transaction hashes, amounts, and timestamps), and any STRs filed must be kept for a minimum of five (5) years after the business relationship has ended or after the date of the transaction.

Data Security: VASPs must ensure the security and confidentiality of all collected data.

While the Central Bank of Armenia (CBA) issues sub-legal acts, regulations, and guidelines detailing AML/CFT obligations for financial institutions, specific and comprehensive AML/CFT requirements for Virtual Asset Service Providers (VASPs) are currently being developed and are anticipated to be established through a forthcoming 'Draft Law on Crypto-Assets (2024)'.

Role: The FMC acts as Armenia's Financial Intelligence Unit (FIU). It is responsible for receiving, analyzing, and disseminating suspicious transaction reports (STRs) to law enforcement agencies for investigation. Obligated entities, including VASPs, must report all suspicious activities to the FMC.

Cryptocurrencies, including what would be considered stablecoins, are generally viewed by the CBA as high-risk, speculative assets and are not classified as e-money, payment tokens, or securities under existing financial legislation.

They are also not recognized as legal tender.

No specific licensing regime for stablecoin issuers exists in Armenia.

No specific reserve requirements for stablecoin issuers currently exist, as there is no framework regulating such issuance.

No specific legal framework or guarantees regarding redemption rights for stablecoin holders is in place. Redemption would likely depend on the terms and conditions set by the issuer, without the backing of specific Armenian financial regulations.

Entity Targeted: Individuals and organized criminal groups involved in establishing and operating large-scale fraudulent cryptocurrency investment schemes, often promising high returns from "mining farms" or fake trading platforms. Violation Type: Large-scale fraud (often under Article 178 of the Criminal Code of Armenia), money laundering (Article 190), illegal entrepreneurship (Article 188), and sometimes other related criminal offenses. Outcome: Multiple arrests of individuals involved, ongoing criminal proceedings, freezing and seizure of assets, and international cooperation to track down perpetrators and recover funds. As these are complex criminal cases, final verdicts and sentences can take significant time.

Armenian authorities are conducting mass raids and investigating nearly 40 individuals for money laundering, indicating that the situation has progressed beyond the initial multiple arrests and asset freezes described in the claim.