Georgia to allow companies to issue stablecoins backed by reserve assets

The central bank of Georgia has authorized resident companies to issue fiat-pegged stablecoins that must be backed by assets in reserve.

Users will be able to redeem the stablecoins at any time, while issuers will be subjected to strict auditing, including by global accounting firms.

Georgia’s monetary authority legalizes stablecoins

The National Bank of Georgia (NBG) has adopted regulations governing the issuance and circulation of fiat money-pegged cryptocurrencies in the country.

The new rules have been introduced with an order signed by Governor Natela Turnava, which establishes the necessary legal framework, local and regional media reported.

The resolution permits Georgia-registered and licensed companies to launch stablecoins, as long as they are fully backed by reserve funds.

Entities that wish to do that must register with the NBG as crypto asset service providers and obtain prior written consent from the regulator.

Those that have already issued stablecoins may continue to operate, but need to submit full documentation for their projects no later than six months after the order comes into force.

The “Regulation on the Initial Placement of a Stable Virtual Asset by a Virtual Asset Service Provider” covers three main categories of digital currencies, the Business Georgia portal noted in an article.

These are stablecoins pegged to the national currency, the Georgian lari, coins pegged to foreign currencies, or backed by other assets.

Reserve coverage is mandatory in all these scenarios and must be 100%, with the assets used clearly separated from the issuer’s own assets.

Large stablecoin issuers to be audited by ‘Big Four’ firms

The issuing organizations will need to have supervisory capital of at least 500,000 lari (more than $183,000 at the current exchange rate).

The size of the required capital will grow with the assets kept in reserve and may reach a maximum of 50 million lari (over $18 million). And if the reserves exceed 15 million lari, the issuer will be obliged to set up a supervisory board.

Georgian regulators have placed particular emphasis on transparency. Reserves will be checked by an independent auditor each quarter, and results must be published on the issuer’s website.

If the reserve assets exceed 15 million lari (approx. $5.5 million), the audit must be carried out by one of the world’s leading professional services firms, such as the “Big Four” – Deloitte, PwC, EY, KPMG – or similar.

Holders will be able to redeem the stablecoins circulated in Georgia at par value and at any moment. Redemption requests must be fulfilled within three business days for amounts not exceeding 300,000 lari and five days for larger sums of money.

Georgia applies global experience in stablecoin regulation

The central bank’s resolution provides a legal definition for stablecoins, describing them as a type of virtual asset whose value is pegged to a predetermined other asset.

Unlike other cryptocurrencies, whose price fluctuates depending on market supply and demand, the price of a stablecoin must remain constant, the monetary authority highlighted.

Issuers are obligated to maintain their stability, the National Bank of Georgia stressed, also quoted by the Russian-language Interfax news agency.

The regulator gave Tether (USDT) as an example, pointing out that the leading stablecoin is equivalent to one U.S. dollar and secured by reserves.

The NBG emphasized its document reflects regulatory mechanisms introduced with the GENIUS Act in the U.S., and the EU’s Markets in Crypto Assets (MiCA) legislation, as well as the frameworks of the UAE, the U.K. and Singapore.

The Georgian regulation also follows recommendations in the field issued by the World Bank and the Organization for Security and Cooperation in Europe (OSCE).

Over the past few years, Georgia has established itself as a crypto mining hub in the South Caucasus due to its affordable hydroelectric power and favorable tax regime. The industry spurred the turnover of cryptocurrencies in its economy.

Other nations in the region, such as Armenia, are also taking active steps to comprehensively regulate their own growing crypto markets, as previously reported by Cryptopolitan.