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Dec 20, 2023 637

Azerbaijan is preparing to issue electronic money

#Finance

The Law ""On Payment Services and Payment Systems"", which entered into force in Azerbaijan in November, was discussed by the participants of the ""Delving into the heart of fintech"" seminar.

In November, the recently enacted law on "Payment Services and Payment Systems" in Azerbaijan was the focal point of discussion among participants at the "Delving into the heart of fintech" seminar. Facilitated by SME Law with the support of the Azerbaijan Fintex Association, the seminar brought together international experts, local fintech market participants, and representatives from the Central Bank of Azerbaijan and various state institutions.

The seminar delved into the provisions of the "Payment Services and Payment Systems" law, analyzing all its innovations and nuances, while drawing parallels with regulatory experiences in Europe related to similar issues. A major topic of discussion was the introduction of electronic money in Azerbaijan. The law introduces two new concepts for Azerbaijan: payment organization and electronic money organization, both subject to specific regulations and licensing. While payment organizations handle various activities, electronic money organizations may engage in the emission of electronic money and the execution of payment transactions. Additionally, unlike payment organizations, electronic money organizations can open current accounts for legal entities and individual entrepreneurs.

The seminar also underscored the importance of combating money laundering through fintech companies. According to Marja from the Azerbaijan Fintex Association, the new law brings revolutionary changes to Azerbaijan's fintech market. Payment and electronic money organizations will now be able to open payment accounts with legal force equivalent to current bank accounts. Furthermore, these entities can issue payment cards, a privilege previously restricted to banks and the national postal operator. Granting electronic money and payment organizations the right to conduct fast fund transfers is also a notable development.

The seminar participants extensively discussed the opportunities and risks associated with the "open banking" system. According to Ruslan Mukhtarov, a technology law expert and managing partner at "SME Law," the implementation of the principles of AISP (Account Information Service Provider) and PISP (Payment Initiation Service Provider) has commenced in line with the "open banking" concept in Azerbaijan. This move, along with amendments to the Civil Code and the "On Banks" law, will contribute to the relaxation of the "banking secrecy" regime. The law introduces stringent requirements for the protection of consumer rights, including specific provisions related to combating fraud. Mukhtarov emphasized that payment service providers must inform customers both before and after transactions, employing enhanced authentication technologies in certain cases.

Exploring Fintech at the Heart of Azerbaijan's Payment System: Insights from a Seminar