Introduction of digital Azerbaijani manat to facilitate control over spending of public funds

Many countries are working to create a digital currency – an online analog of the national currencies of their countries. Some are even at the testing stage.

China started creating the digital yuan in 2014. The concept was developed, and the system of its use was repeatedly tested. This year, five digital dollar pilot projects will be implemented in the US. In October last year, the Bank of Russia presented the concept of the digital ruble. The European Central Bank analyzes the pros and cons of introducing the digital euro from 2020 and launches pilot projects on it. In April this year, the Central Bank of Azerbaijan also announced research on creating a digital manat.

How necessary is the creation of digital manat today? What is it for? Is there a demand for its application in Azerbaijan?

Report talked about this with the IT director of one of the local banks, Emil Mehdiyev, who believes that the introduction of digital currency will give a great impetus to the development of the digital economy.

“Now, in no country, there is a need to introduce a digital currency. But this does not mean that this issue should be postponed. The introduction of a digital currency, due to its advantages, will give a great impetus to the development of the digital economy. Digital currency combines not only the advantages of cash and non-cash money but also has several other features. Since each unit of digital currency has a unique identifier, it becomes possible to track the movement of specific funds. This feature will greatly facilitate, for example, control over the expenditure of public funds. Another advantage of digital currency is the ability to implement ‘smart’ contracts. This, in turn, allows reducing the number of intermediaries in making payments and significantly speeding up the signing of contracts between trade enterprises. Thus, the time for concluding a transaction with the appropriate payment will decrease from several days to several minutes,” Mehdiyev said.

Touching upon cybersecurity, the expert said that they are increasing with the digitalization of the economy. “The cost of banks to maintain the level of security of digital solutions is increasing annually. When introducing a digital currency, cybersecurity issues will be given close attention. I do not think that the costs of banks will increase significantly since digital currencies are introduced by central banks and will already be protected. Banks will have to provide security of customer access to digital currency wallets,” he noted.

Mehdiyev believes that banks should definitely play an active role in the process of creating digital manat. “And not only banks. Since the proper infrastructure is necessary for the full functioning of a digital currency, it would be useful to consult, for example, with telecom operators, with enterprises, with a dedicated group of users when implementing it. It is possible to study the experience of countries that are already introducing digital currency,” he noted.