Regulation
Cryptocurrency Regulation 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 financial technology. Recent developments in its cryptocurrency industry highlights this forward-thinking approach. Georgia has introduced groundbreaking policies at a time when many of its competitors are still unsure how to regulate the cryptocurrency industry.
Curious to know what makes Georgia’s crypto framework special? Let’s explore the details!
1. Cryptocurrency Regulations in Georgia: An Overview
Although Georgia is not a tax haven for cryptocurrencies, it offers several advantages for cryptocurrency enthusiasts. These include a support position on Blockchain and cryptocurrency, low electricity costs, and special economic zones with attractive tax benefits. The Georgian government sees cryptocurrency regulations as a way to harness the potential of blockchain while protecting investors. June 13, 2023THE National Bank of Georgia announced new regulations in line with international standards set by the Financial Action Task Force. This regulation is primarily aimed at virtual asset service providers (VASPs).
1.1. New Cryptocurrency Regulation in Georgia: Key Details
Effective January 1, 2024, Georgia’s new cryptocurrency law clarified the legal landscape for virtual assets. The law defines 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. This new regulatory framework grants VASPs recognition but also imposes stringent 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 regulation and AML/CFT controls in Georgia, focusing on risk management in the financial sector, including virtual assets.
- November 3, 2023: The National Bank of Georgia has cooperated with Ripple Labs for a digital lari CBDC project, using the Ripple 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 in Georgia.
- April 19, 2023: Gate Pay, a service from Gate.io, has partnered with CityPay.io to offer cryptocurrency payment options at over 600 merchants in Georgia.
- March 27, 2023: Binance has opened a new blockchain hub in Georgia to promote cryptocurrency adoption and industry education.
3. Legal Framework of Cryptocurrency Taxation in Georgia: What You Need to Know
For a individual cryptocurrency 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 is becoming a favorite destination for cryptocurrency enthusiasts.
For a registered crypto-assetsSThings are a little different, but not as bad as we see elsewhere in Europe. If you have a registered business in the country, you will face a 15% corporate income tax on your profits, along with a 5% dividend tax when you distribute those profits to the owners.
Don’t worry. There is a policy in the country designed to support small businesses. If your business is deemed eligible for Small Business Statusyou can do business paying only 1% tax on profits.
It is not easy to qualify for the status. If the National Bank of Georgia classification cryptocurrency trading as a currency transaction, may exclude you from SBS benefits. Additionally, there is an annual turnover limit for SBS; exceeding this limit will result in the loss of status.
4. Cryptocurrency Mining in Georgia: What’s the Allure?
Georgia is a popular destination for cryptocurrency miners due to low electricity costs. A survey a few years ago reported that there were over 200,000 crypto miners operating in the country.
To mine cryptocurrency legally, you need a business registered in Georgia. Legal entities involved in mining are eligible for the country’s commercial electricity rates. However, cryptocurrency mining is not tax-free. Legal mining operations face a 20% income tax, a 15% minimum profit tax, and a nearly 5% dividend tax. Many mining companies take advantage of the tax advantages available in free industrial zones, such as Tbilisi, Poti, and Kutaisi.
5. History of Cryptocurrency Regulations in Georgia
2024: 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 Georgia’s finance minister, signed a bill introducing a tax on cryptocurrencies.
2018: The World Bank estimated that around 200,000 people in Georgia were involved in cryptocurrency mining.
Final note
As Georgia works towards EU membership and aligning itself with international standards, it is introducing stricter financial regulations. Recent IMF recommendations highlight the need for tighter controls in the banking and cryptocurrency sectors, focusing on issues such as dollarization and financial integrity. These changes could present both challenges and opportunities for the cryptocurrency sector in Georgia. It remains to be seen whether these regulations will limit growth or strengthen the sector. However, Georgia’s commitment to international standards will impact its financial landscape and the cryptocurrency regulatory environment. Only time will tell how these regulations will impact the sector.