A Blockchain System for Azerbaijan's Digital Economy

Farid Osmanov, CBA's chief information officer, first announced the five-year program for the digital transformation of the economy - including a partnership with IBM on a distributed ledger system to be used in the banking sector - at the Azerbaijan-Germany Business Forum on Energy and ICT. In November, chairman of the Azerbaijani Internet Forum, Osman Gunduz, told the press that a few other state agencies were on the course to implement distributed ledger-based solutions in areas such as housing, utilities and even the court system to facilitate record-keeping and notary services.

Government services hit X-Road. According to Nijat Asadli, manager of Azerbaijan's Digital Trade Hub, there are three main areas in which the government seeks to boost innovation by deploying digital infrastructure: the DTH itself, the e-Government portal and central bank operations.

The only digital infrastructure initiative of the Azerbaijani government that relies on blockchain technology is the one that the nation's central bank is overseeing.

As the CBA's chief information officer, Farid Osmanov, told Cointelegraph in an email, the government enacted a document in September 2018 entitled the State Program on Expansion of Digital Payments for 2018-2020 - a roadmap for coordinating technological advancements in digital banking.

As a key condition to enable digital banking services, the program outlined a "Private blockchain framework with trusted nodes, permissioned access and consensus services" for user identification.

The pilot project that the CBA embarked on to advance the goals of the state program has three prongs: the development of a strategic digital innovation plan, the creation of the blockchain-based digital identification system, and the deployment of the blockchain hardware.

Essentially, the blockchain system will automate the Know Your Customer process, all the while dramatically decreasing processing time.

The digital identification system will be incorporated into the e-Government system, and the open API architecture will allow banks to integrate it with their digital infrastructures through a standardized process.

With the new digital identification system on the way, Azerbaijan is about to take its place among the ranks of countries that have implemented permissioned blockchain solutions to improve the efficiency of a certain aspect of government operations.

Still, yet another adherent of the "Blockchain before crypto" approach, the nation is only ready to go so far: According to a November 2018 statement by the CBA's first chairman, issuing a state-backed digital currency is out of the question for Azerbaijan.