Regulation
Cryptocurrency Regulations in Georgia 2024
Georgia, a transcontinental country in Eastern Europe and Western Asia, has a population of 3.7 million and its capital is Tbilisi. Known for its growing economy and high human development index, Georgia is one of the most dynamic emerging countries markets. The country has a positive attitude towards technology, especially fintech. Recent developments in its cryptocurrency The industry is highlighting this forward-thinking approach. Georgia has introduced revolutionary policies at a time when many of its competitors are still unsure of how to regulate the crypto industry.
Curious about what makes Georgia’s crypto framework so special? Let’s explore its details!
1. Cryptocurrency Regulation in Georgia: An Overview
Although Georgia is not a tax haven for cryptocurrencies, it offers several advantages for crypto enthusiasts. This includes a position of support for blockchain and cryptocurrency, low electricity costs and special economic zones with attractive tax benefits. The Georgian government sees cryptocurrency regulation as a way to harness the potential of blockchain while protecting investors. June 13, 2023THE National Bank of Georgia announced new regulations aligned with international standards established by the Financial Action Task Force. This regulation primarily targets virtual asset service providers (VASPs).
1.1. New Cryptocurrency Regulations in Georgia: Key Details
As of January 1, 2024, Georgia’s new cryptocurrency regulations have clarified the legal landscape for virtual assets. The regulations define virtual assets as digital forms of value that can be exchanged or used for payments and investments, excluding cash representations, securities, and NFTs. While virtual assets are not considered legal tender, cryptocurrencies can still be used for payments through VASPs. These entities, which include those that exchange virtual assets for currency, store or manage virtual assets, or operate trading and lending platforms, must register with the National Bank of Georgia. The new framework gives VASPs recognition but also imposes strict anti-money laundering obligations, including detailed record keeping and transaction traceability.
2. Recent developments in cryptocurrency regulation in Georgia
Here’s a look at recent changes to cryptocurrency regulations in Georgia:
- March 19, 2024: The IMF stressed the need for strong AML/CFT regulation and controls in Georgia, with an emphasis on risk management in the financial sector, including virtual assets.
- November 3, 2023: The National Bank of Georgia has partnered with Ripple Labs for a digital lari CBDC project, using Ripple’s platform for the pilot.
- June 28, 2023: Tether has signed a memorandum of understanding with the Georgian Government to position the country as a hub for P2P technology.
- May 31, 2023: Tether has invested in CityPay.io, enabling USDT payments in various locations across Georgia.
- April 19, 2023: Gate Pay, a service of Gate.io, has partnered with CityPay.io to offer crypto payment options at over 600 merchants in Georgia.
- March 27, 2023: Binance has opened a new blockchain hub in Georgia to promote crypto adoption and industry education.
3. Cryptocurrency Tax Framework in Georgia: What You Need to Know
For a individual crypto traderGeorgia is the best country to live in because individuals enjoy 0% capital gains tax on their cryptocurrency profits. Sounds exciting, right? No wonder it’s becoming a favorite destination for cryptocurrency enthusiasts.
For a registered Cryptocurrency CompanymThings are a little different, but not as bad as what we see elsewhere in Europe. If you have a company registered in the country, you will have to pay a 15% corporate tax on your profits, as well as a 5% dividend tax when distributing those profits to the owners.
Don’t worry. There is a policy in the country to support small businesses. If your business is deemed eligible Small Business Statusyou can do business paying only 1% tax on profits.
It is not easy to get the status. If the National Bank of Georgia class cryptocurrency trading As a foreign exchange transaction, this could disqualify you from SBS benefits. Additionally, there is an annual turnover limit for SBS; exceeding this limit means losing the status.
4. Cryptocurrency mining in Georgia: what’s the appeal?
Georgia is a popular destination for cryptocurrency miners due to its low electricity costs. A survey conducted a few years ago revealed that more than 200,000 cryptocurrency miners were operating in the country.
To mine cryptocurrencies legally, you must have a registered company in Georgia. Legal entities involved in mining can benefit from the country’s commercial electricity tariffs. However, cryptocurrency mining is not tax-exempt. Legal mining companies are subject to a 20% income tax, a minimum profit tax of 15%, and a dividend tax of almost 5%. Many mining companies take advantage of the tax benefits available in free industrial zones, such as Tbilisi, Poti, and Kutaisi.
5. Timeline of cryptocurrency regulation in Georgia
2024: The new cryptocurrency regulations have been implemented. These developments have brought the country in line with the Financial Action Task Force guidelines.
2023: The National Bank of Georgia has introduced new regulations for virtual asset service providers.
2019: Nodar Khaduri, then Minister of Finance of Georgia, signed a bill introducing taxation on cryptocurrencies.
2018: The World Bank estimates that around 200,000 people in Georgia were involved in cryptocurrency mining.
Endnote
As Georgia prepares to join the EU and align with international standards, it is implementing stricter financial regulations. Recent IMF recommendations highlight the need to strengthen controls in the banking and crypto sectors, with a focus on issues such as dollarization and financial integrity. These changes could present both challenges and opportunities for the crypto industry in Georgia. Whether these regulations will limit growth or strengthen the sector remains to be seen. However, Georgia’s commitment to international standards will influence its financial landscape and crypto regulatory environment. Only time will tell what impact these regulations will have on the industry.