Crypto License in Georgia

The minimum requirements for a crypto license in Georgia are:

• Legal entity registration in Georgia;
• Hiring a local director / representative, residing in Georgia;
• A local office space;
• AML-CFT policies and procedures & risk assessment methodology;
• AML-CFT control systems;
• Internal audit system and procedures;
• “Know Your Coworker” guidelines;
• Developing of a description of the software and hardware;
• Employee training program.

The legality of cryptocurrency business in Georgia

Cryptocurrency businesses have been made legal in Georgia from July 1st of 2023. This date marks the enforcement of the rule of Virtual Asset Service Provider Registration at the National Bank of Georgia, Cancellation of the Registration and Regulation (Order No. 94/04 of June 13, 2023), which completes the “main law” on crypto businesses, passed in the beginning of the year.

What we call the “main law”, as it defines the framework for virtual asset services providers in Georgia, is actually an amendment to the existing Law of Georgia on Facilitating the Suppression of Money Laundering and Terrorism Financing from 2019.

Further detailing the Georgian framework for cryptocurrency business, the National Bank of Georgia has issued a few statements commenting on the progress made during the issuance of these new laws. It also published information to the attention of VASPs and cryptocurrency projects willing to apply for the crypto license in Georgia.

Cryptocurrency regulation in Georgia

In Georgia, the cryptocurrency regulation does not recognize virtual assets as legal tender. It is explicitly prohibited to use crypto for payment, except in cases which the National Bank of Georgia defines as “essential for providing virtual asset services”.

This case is an important example and demonstration of the stance of the Republic of Georgia on crypto: a will to provide a clear and understandable framework for businesses, an overall positive view on crypto, but also a strong position on what should be legal or not.

The goal is to create confidence, in a small country that few people know and many may confuse with the USA State of Georgia.

Summing up the cryptocurrency regulation in Georgia: virtual assets have been integrated into the domestic AML-CFT law. The National Bank of Georgia has then published guidelines, issued statements and especially a legal rule on registration and regulation of VASP in Georgia. In early August of 2023, it also released a compliance questionnaire for applicants, giving a detailed description of the authorities’ expectations for applicants.

Georgia Virtual Cryptocurrency Registry

Georgia’s National Bank holds a register of cryptocurrency companies it regulates. The register is public and available in the form of an Excel sheet, free to download on the regulatory authorities’ website.

Crypto-authorization process in the Georgia Virtual Currency Registry

The Order 94/04 issued on June 13th of 2023 gives an explanation of the crypto-authorization process in Georgia. It outlines the requirements in terms of corporate structure, AML-CFT policies and procedures, as well as detailing the application and authorization process with the National Bank of Georgia.

The registration of Georgia Company in Register of crypto currency companies

Applying to enter a company in the Georgian register of crypto currency companies is done once all the requisites are fulfilled. The registration process takes about 2 months, during which the National Bank of Georgia may call the applicant for further information or to point out irregularities or insufficiencies in the case.

Whenever the National Bank of Georgia asks for regularization of a shortcoming, the applicant has 10 days to respond and provide an explanation or correct the potential deficiency.

Before carrying out an application for a Georgian crypto license, a VASP shall prepare accordingly by preparing the following elements:

• Formation of a legal entity in Georgia;
• Hiring of a local representative/director, that shall reside in Georgia 14 days per month;
• Paying the licensing fee of 5,000 GEL (about 1,750 EUR);
• Necessary compliance and AML-CFT documents.

Governmental Statements on Crypto in Georgia

The intention to create a framework for virtual asset services providers in Georgia dates back to Summer 2022, when the Governor of the National Bank of Georgia announced the drafting of a new legislation.

The following amendment to the Law on Anti-Money Laundering and Combating the Financing of Terrorism was the next step in getting the grounds ready for the Georgian crypto framework.

The Georgian government is positioning itself as crypto friendly. In June of 2023, the Ministry of Economy signed an agreement with Tether, the world famous issuer of stablecoin USDT, to assist in developing the national blockchain infrastructure.

At this occasion, Georgian Deputy Minister of Economy and Sustainable Development, Irakli Nadareishvili, stated that the goal of this cooperation is to “position Georgia as a country with an attractive ecosystem for technology startups”.

Requirements for companies engaged in crypto activities in Georgia

At all times, a licensed crypto company in Georgia must comply with the requirements for entities engaged in crypto activities. Some of these requirements apply from the application process and are carried on during the life of the crypto company.

The main requirements include, though not limited to:

• The local director should be in the territory of Georgia for a minimum of 14 calendar days per calendar months;
• Approved AML/CFT compliance control system in place;
• Approved risk assessment methodology;
• Procedures ensuring the proper implementation of the AML/CFT compliance control system;
• Implementation of “Know Your Co-Worker” policies to ensure proper employee selection, in an AML/CFT sight;
• Set-up and hold an employee training program (on the matters of AML/CFT);
• Appropriate mechanisms detailed using a risk-based approach to monitor customer transactions;
• Have an internal audit function that regularly checks on the good implementation of the law in the company.

The National Bank of Georgia maintains communication with the licensee at all time, as explained in the rule for virtual asset services providers. The rule also details the conditions under which a crypto company should report information to the regulatory authorities.

The process of setting up a company for a cryptocurrency business in Georgia

Only companies registered in Georgia can apply to become a cryptocurrency business in Georgia. This is one of two substance requirements, with the obligation to hire a local representative or director.

Incorporating a Georgian company is simple, as the country is very open for business. The process is remote, allows for foreign ownership and takes about one business week.

There is no minimum share capital requirement for setting up a limited company in Georgia. There is also no such requirement for a crypto company, meaning the share capital can be left at a convenient minimum.

Taxation for cryptocurrency companies in Georgia

The standard corporate income tax for companies in Georgia, including crypto licensed entities, is 15%. It is possible to benefit from a 0% tax rate by incorporating in one of the three Georgian Free Zones (Tbilissi, Poti or Kutaisi).

Choosing a free zone for incorporating a crypto company isn’t necessarily an easy choice, as these free zones are mainly aimed at logistics and industrial companies, meaning it might not be ideal for a crypto company.

The standard tax rate on distributed dividends is 5%, with some specific cases depending on the residency country of the receiver. The rate can then be as low as 0% or as high as 15%.

Obligations for crypto companies in Georgia

Crypto companies in Georgia have the obligation to comply with the AML/CFT laws of the country at all times. This also means that the company shall stay up to date with legislation, as the framework is new and yet to be tested on the ground.

An internal audit function is a requisite of the National Bank of Georgia to grant a license. The crypto business shall have people and systems in place to check the proper implementation of the law. As there is the law and the spirit of the law, the audit function should also look more broadly and estimate if the company operations are generally doing their best effort to prevent wrongdoing with cryptocurrencies.

Implicitly, the crypto companies in Georgia are obligated to maintain ongoing communication with the National Bank of Georgia. This would be the best way to guarantee compliance with the law and the expectations of the rule maker. This is also part of the obligation to report on the suspicious activity detected by the VASP.

Sanctions for violating Georgia crypto-business obligations

The Financial Monitoring Service of the National Bank of Georgia is actively cooperating with international organizations such as the Security Council of the United Nations. Therefore, it expects its licensees to comply with the law to not permit any bit of money laundering or terrorism financing.