Today there are not many countries in the world where there are stable rules for regulating cryptocurrencies. At the moment, cryptocurrencies in Georgia are neither prohibited nor allowed. However, the country’s government is currently developing a bill to begin holding them to comply with EU rules. Recall that Georgia has an association with the European Union and applied as a candidate for EU membership but was refused. However, the country’s government does not want to deviate from this course. It continues to adopt bills that will further help to integrate faster into the standard system of the European Union.
What cryptocurrency regulation rules does Georgia plan to introduce?
It should be said right away that many crypto enthusiasts live in Georgia. According to some data, in 2018, more than 200 thousand people were engaged in mining here, which is explained by the low cost of electricity. According to Moneyval, this country’s volume of exchange transactions can range from 3.5 to 5 million lari ($1.1-1.6 million).
The new legislation includes the registration and licensing process for crypto companies. The package of legislative acts provides for convergence with three EU directives:
- about payment services,
- capital requirements;
- about virtual asset service providers.
Thus, this will include compliance testing and enforcement of AML procedures for crypto market participants.
Also, earlier, the the Central Bank’s intention to issue a digital lari. According to experts, this will not be a cryptocurrency but an evolution of cash. It will most likely be blockchain-based and a fast and cheap payment method without an internet connection. Mining the digital lari will not be possible, and the Central Bank of Georgia will issue this asset. It is expected that this will become a more accessible, safer, and faster way to transfer and pay for goods and services.
What crypto regulation rules exist now?
At the moment, there are no clear rules for the regulation of cryptocurrencies. No one here allowed the purchase and sale of cryptocurrencies but did not prohibit it. However, it is impossible to use this currency to pay for goods and services in the country today (although there are cases of buying a car and real estate for cryptocurrencies).
In 2019, a bill was passed to tax miners. The tax is also levied on the conversion of crypto assets into fiat. Today, in Georgia, the crypto industry is gradually leaving the “gray zone” and starting to work legally.
When selling cryptocurrencies to individuals, tax is charged only if the source of income is in Georgia. However, cryptocurrency is not listed in the Tax Code of Georgia as a source of income, so it is not taxable. Such assets are also not subject to VAT here.
It is also worth mentioning that there are Free Industrial Zones in Georgia where you can get a license. There is preferential taxation here, which allows attracting the attention of investors from all over the world. Such zones exist in the cities of Tbilisi, Kutaisi, and Poti.