Georgia Reveals Plans to Regulate its Crypto Market

Georgia is currently planning to set up regulatory frameworks that will guide the use of cryptocurrencies in the country. The framework will include licensing, compliance testing, and Anti Money Laundering (AML) requirements for crypto exchanges.

The Governor of the National Bank of Georgia (NBG), Koba Gvenetadze, disclosed the move during an interview with The Financial.

“The NBG is planning to regulate crypto market in Georgia. To this regard, we have developed an initial draft of the relevant legislative changes in accordance with Financial Action Task Force requirements. We are also benefitting from technical assistance of the International Monetary Fund staff in the development of this regulatory framework. Draft of Legislative changes at this stage includes registration / licensing, compliance testing and AML control requirements for crypto market players.”

He pointed out that banks and other financial institutions are prohibited from offering crypto services. Additionally, individuals who invest in digital assets will be classified as high-risk clients by financial institutions, with the institution offering them protection against the asset class.

Furthermore, Gvenetadze noted that since crypto is not regulated in Georgia, there is no accurate data on the amount of crypto trading in the country.

However, he referenced the fifth Round Mutual Evaluation Report of Georgia released by Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, MONEYVAL in September 2020, which suggests that crypto trading volume is between $1.1 million to $1.6 million monthly.

A Bitcoin Mining Hub

Due to its cheap hydropower and low regulation, Georgia has been a top destination for bitcoin mining firms. It has been home to one of the industry’s top Bitcoin mining firms, Bitfury. 

According to a recent report by Arcane Research, over 3.9 million Georgians are interested in crypto mining activities. However, the report states that the country produces just around 0.18% of Bitcoin’s total hashrate.

Georgia also has a light tax rule on Bitcoin miners, with 0% tax for Bitcoin miners, 15% IT tax and 18% VAT for Corporate miners, the report said.

While there are no regulations on crypto in Georgia, other countries have been taking steps to regulate the nascent asset class.

Last month, the Bank of England (BOE) released its first regulatory framework for digital assets in a bid to prevent them from being used to evade financial sanctions.