Do I need to register?
Crypto regulation in Georgia
May 30th 2023
Georgia, known for its favorable environment for crypto miners with relaxed governmental regulations and a 0% tax rate on cryptocurrency trading, has recently introduced new regulations that came into effect on January 1st. These regulations aim to establish a legal framework in line with the recommendations of the Financial Action Task Force (FATF) and address the risks of money laundering and terrorist financing associated with virtual assets, particularly cryptocurrency.
The purpose of these changes is to prevent and mitigate the potential misuse of virtual assets, which possess a high level of anonymity and difficulty in tracing transactions. The new legal framework provides definitions and guidelines to tackle these risks effectively.
Under the new law, a virtual asset is defined as a digital representation of value that is interchangeable, non-unique, digitally tradable or transferable, and can be used for payment or investment purposes. However, certain digital representations, such as cash, securities, financial instruments, NFTs, and collectibles, are not subject to these regulations. Cryptocurrency, on the other hand, falls within the scope of the new regulations.
It's important to note that virtual assets, including cryptocurrency, are not recognized as legal tender in Georgia, except in exceptional cases determined by the National Bank. The official currency for transactions in the country remains the Georgian Lari. However, virtual assets can still be used for payments through Virtual Asset Service Providers (VASPs) following a specific process:
The purpose of these changes is to prevent and mitigate the potential misuse of virtual assets, which possess a high level of anonymity and difficulty in tracing transactions. The new legal framework provides definitions and guidelines to tackle these risks effectively.
Under the new law, a virtual asset is defined as a digital representation of value that is interchangeable, non-unique, digitally tradable or transferable, and can be used for payment or investment purposes. However, certain digital representations, such as cash, securities, financial instruments, NFTs, and collectibles, are not subject to these regulations. Cryptocurrency, on the other hand, falls within the scope of the new regulations.
It's important to note that virtual assets, including cryptocurrency, are not recognized as legal tender in Georgia, except in exceptional cases determined by the National Bank. The official currency for transactions in the country remains the Georgian Lari. However, virtual assets can still be used for payments through Virtual Asset Service Providers (VASPs) following a specific process:
- The payment is made through a VASP.
- The cryptocurrency is deducted from the user's wallet by the VASP.
- The VASP exchanges the cryptocurrency into fiat money.
- The recipient receives the fiat money from the VASP.
Exceptions
However, individual crypto miners, participants in Bitcoin mining pools, and individual traders are exempt from the mandatory registration requirements.
Procedure
The registration procedure for VASPs involves submitting the necessary documentation within 90 calendar days after the National Bank of Georgia publishes a legal act outlining the registration process. The deadline for registration is expected to be set by July 1st, 2023. The service fee for registration is set at 10,000 GEL.
Requirements
In addition to the registration requirements, VASPs are now considered "Accountable Persons" under the Law of Georgia on Facilitating the Prevention of Money Laundering and the Financing of Terrorism. This designation imposes legal obligations on VASPs to implement preventive measures against money laundering and terrorism financing. For transactions exceeding 3,000 GEL, 1,000 USD, or 1,000 EUR, accountable persons must undertake preventive measures, including client identification, verification of beneficial ownership, establishment of business relationship goals, and periodic monitoring of the relationship.
The new regulations also mandate the transfer and receipt of accompanying information when engaging in virtual asset transactions. This is in line with the "travel rule," which aims to enhance transaction traceability.
VASPs are further required to implement preventive measures for existing clients prior to registration, no later than July 1, 2024, ensuring compliance with the new regulations.
These regulatory changes in Georgia demonstrate the country's commitment to addressing the risks associated with virtual assets and strengthening its anti-money laundering and counter-terrorism financing efforts in line with international standards.
GIC, a professional team well-versed in this field, can provide assistance to VASPs in gathering the required documentation for registration and ensuring compliance with the new regulations.
The new regulations also mandate the transfer and receipt of accompanying information when engaging in virtual asset transactions. This is in line with the "travel rule," which aims to enhance transaction traceability.
VASPs are further required to implement preventive measures for existing clients prior to registration, no later than July 1, 2024, ensuring compliance with the new regulations.
These regulatory changes in Georgia demonstrate the country's commitment to addressing the risks associated with virtual assets and strengthening its anti-money laundering and counter-terrorism financing efforts in line with international standards.
GIC, a professional team well-versed in this field, can provide assistance to VASPs in gathering the required documentation for registration and ensuring compliance with the new regulations.
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