Georgia has been in a difficult position since the start of the war in the East. Ukraine and Russia are the country’s largest trading partners. In an interview with FinChannel regarding this situation, National Bank of Georgia (NBG) Governor Koba Gwenetadze said that it plans to establish a regulatory framework for crypto.
crypto trading in georgia
It is not yet clear how many people will be affected by these upcoming measures. Gwynetadze said that the country does not yet have accurate data on crypto behavior in Georgia.
“However, the Fifth Georgia Mutual Assessment Report, published in September 2020” […] states that the exchange transaction volume can range between 3.5 to 5 million Georgian lari (1 to 1.5 million euros) per month. This may be the most accurate governor.
It remains to be seen what these rules will look like after the involvement of the FATF and IMF.
Crypto traders brand high risk
Gwenetadze says that measures have already been taken by the NBG. It looks like it sees crypto as a bigger threat. The bank has banned financial institutions in Georgia from providing crypto services.
The National Bank also took measures against people trading in digital assets (ie crypto). They should be flagged as ‘high risk’ by financial institutions and given ‘appropriately advanced prevention measures’. So it’s not very positive for investors in Georgia.
Anti-money laundering organization helps
When asked if the country wanted to regulate the crypto market, Gwynetadze simply said yes. This is somewhat positive for crypto, as it automatically makes it legal. However, with regulation come rules.
To determine these, he takes the help of intergovernmental organizations. They should help Georgia with changes to crypto laws. First, he prepared a draft according to the Financial Action Task Force (FATF). It is an organization that develops policies to combat money laundering.
Gwynetadze said: “It is to be noted that before the above rules came into force, certain measures have already been taken by NBGs. In particular, financial institutions are prohibited from offering virtual services for exchange and transfer of assets. Also, persons carrying out activities related to virtual assets should be classified as high-risk clients by financial institutions and subject to appropriate and advanced preventive measures.”
The IMF is also involved in regulation.
Not only the FATF, but also the International Monetary Fund (IMF) will help Georgia establish regulation. The organization previously advised Argentina, El Salvador and India not to start with crypto, so given the organization’s history, this could be a negative for crypto investors.
At the moment, the IMF is helping to design the legislative changes. This includes registration and licensing, compliance testing to see if it will work, and anti-money laundering control rules for players in the crypto market.
The need of the hour is to clarify these regulations, which are yet to come into force. However, this does not prevent Georgian Bank from tightening the reins of the crypto market.
The Caucasian nation is currently one of the few countries that want to regulate the crypto sector without taking companies away from regulations. In 2019, the former Soviet state passed a law abolishing VAT on crypto-related services.