Crypto Regulations in Georgia 2024

Georgia, a transcontinental country in Eastern Europe and West 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 markets. The country has a positive attitude towards technology, especially fintech. Recent developments in its cryptocurrency sector highlight this forward-thinking approach. Georgia has introduced groundbreaking policies in a time when many of its competitors are still uncertain about how to regulate the crypto industry.

Curious about what makes Georgia’s crypto framework special? Let’s explore its details!

1. Crypto Regulations in Georgia: An Overview 

While Georgia is not a crypto tax haven, it offers several advantages for crypto enthusiasts. These include a supportive stance on blockchain and cryptocurrency, low electricity costs, and special economic zones with attractive tax benefits. The Georgian government views crypto regulations as a way to harness blockchain’s potential while protecting investors. On June 13, 2023, the National Bank of Georgia announced new regulations aligning with international standards set by the Financial Action Task Force. This regulation mainly targets Virtual Asset Service Providers (VASPs).

1.1. New Crypto Regulation in Georgia: Key Details

Starting January 1, 2024, Georgia’s new crypto regulation has clarified the legal landscape for virtual assets. The regulation defines virtual assets as digital forms of value that can be traded 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 framework gives VASPs recognition but also imposes strict anti-money laundering obligations, including detailed record-keeping and transaction traceability.

2. Recent Developments in Georgia’s Crypto Regulations

Here’s a look at recent changes in Georgia’s crypto regulations:

• March 19, 2024: The IMF emphasized the need for strong regulations and AML/CFT controls in Georgia, focusing on managing risks in the financial sector, including virtual assets.
• November 3, 2023: The National Bank of Georgia teamed up with Ripple Labs for a digital lari CBDC project, using Ripple’s platform for the pilot.
• June 28, 2023: Tether signed an MOU with the Georgian government to position the country as a hub for P2P technology.
• May 31, 2023: Tether invested in CityPay.io, allowing USDT payments in various locations across Georgia.
• April 19, 2023: Gate Pay, a service from Gate.io, partnered with CityPay.io to offer crypto payment options at over 600 merchants in Georgia.
• March 27, 2023: Binance opened a new blockchain hub in Georgia to promote crypto adoption and industry education.

3. Georgia’s Crypto Taxation Framework: What You Need to Know

For an individual crypto trader, Georgia is the best country to live in, because individuals enjoy a 0% capital gains tax on their cryptocurrency profits. Sounds exciting, right? No wonder it is becoming a favourite destination for crypto enthusiasts. 

For a registered crypto business, things are a little different, but not as bad as what 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 distributing those profits to the owners. 

Don’t worry. There is a policy in the country intended to support small businesses. If your business is found eligible for Small Business Status, you can do business paying just a 1% tax on profits.  

It’s not easy to get qualified for the status. If the National Bank of Georgia classifies crypto trading as a currency operation, it could disqualify you from SBS benefits. Additionally, there is an annual turnover limit for SBS; exceeding this limit means losing the status.  

4. Crypto Mining in Georgia: What’s the Appeal?

Georgia is a popular destination for crypto miners due to its low electricity costs. A survey from a few years ago reported that over 200,000 crypto miners were operating in the country.

To mine crypto legally, you need a registered enterprise in Georgia. Legal entities involved in mining can benefit from the country’s commercial electricity rates. However, crypto mining is not tax-free. Legal mining businesses face a 20% income tax, a minimum 15% profit tax, and nearly 5% dividend tax. Many mining companies take advantage of tax benefits available in Free Industrial Zones, such as Tbilisi, Poti, and Kutaisi.

5. Timeline of Crypto Regulations in Georgia

2024: The new crypto regulations were implemented. These developments aligned the country with Financial Action Task Force guidelines. 

2023: The National Bank of Georgia introduced new regulations for Virtual Asset Service Providers. 

2019: Nodar Khaduri, the then Minister of Finance in Georgia, signed a bill introducing taxation for cryptocurrency.

2018: The World Bank estimated that around 200,000 people in Georgia were involved in cryptocurrency mining.

Endnote 

As Georgia works towards EU membership and aligns with international standards, it is introducing stricter financial regulations. Recent IMF recommendations highlight the need for stronger controls in the banking and crypto sectors, focusing on issues like 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 how these regulations will impact the industry.

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