Georgia -- Licensing Requirements Regulatory Overview
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Georgia has recently established a comprehensive regulatory framework for Virtual Asset Service Providers (VASPs), moving from a less regulated environment to a robust licensing regime in line with Financial Action Task Force (FATF) recommendations. The primary regulator is the National Bank of Georgia (NBG).
The framework was primarily introduced through the Law of Georgia on Virtual Assets, adopted by Parliament in June 2023, and subsequent NBG resolutions detailing its implementation.
Regulatory Authority
- National Bank of Georgia (NBG): The central bank is the sole licensing and supervisory authority for VASPs in Georgia.
Registration vs. Licensing Regime
Georgia operates a licensing regime for Virtual Asset Service Providers (VASPs), rather than a simple registration regime. Entities engaging in VASP activities must obtain an authorization (license) from the NBG before commencing operations.
Required Licenses for Specific Activities
The Georgian framework broadly categorizes services under the umbrella of a "Virtual Asset Service Provider" (VASP) license/authorization. The specific license required covers a range of activities.
According to the Law of Georgia on Virtual Assets, a VASP is defined as any natural or legal person that, for or on behalf of another natural or legal person, conducts one or more of the following activities or operations:
- Exchange between virtual assets and fiat currencies.
- Exchange between one or more forms of virtual assets.
- Transfer of virtual assets.
- Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets (custody services).
- Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.
Therefore, for the specific activities requested:
- Exchanges (Virtual Asset Exchange Providers):
- Required License: VASP Authorization from the NBG.
- This falls directly under points 1 and 2 of the VASP definition.
- Custody Providers (Virtual Asset Custody Providers):
- Required License: VASP Authorization from the NBG.
- This falls directly under point 4 of the VASP definition.
- Payment Processors (dealing with Virtual Assets):
- Required License: VASP Authorization from the NBG, if the payment processing involves any of the defined VASP activities (e.g., facilitating the transfer of virtual assets, exchanging virtual assets for fiat as part of a payment, or acting as an intermediary for such transactions).
- If a payment processor only handles fiat currency payments for the purchase of virtual assets (e.g., a traditional payment gateway facilitating fiat payments to an exchange), it might primarily fall under general payment service regulations, but the connection to virtual assets will still bring it under the NBG's scrutiny regarding AML/CFT for VASPs. However, if they directly facilitate VA transfers or exchanges as part of their payment service, a VASP license is required.
Key Requirements for VASP Authorization
The specific requirements are detailed in the Law of Georgia on Virtual Assets and subsequent NBG resolutions (e.g., NBG Resolution N133/04 dated November 29, 2023, on Approving the Rules for Licensing and Supervision of Virtual Asset Service Providers). Key aspects include:
- Legal Entity: The applicant must be a legal entity registered in Georgia.
- Minimum Capital Requirements:
- Applicants must meet minimum share capital requirements. The specific amounts are typically defined in NBG resolutions.
- As of recent implementations, the required share capital for a VASP is 1,000,000 GEL (Georgian Lari).
- In addition, VASPs must maintain sufficient operational capital to cover their operational risks and costs.
- AML/KYC Compliance:
- Applicants must establish and implement robust Anti-Money Laundering (AML) and Know Your Customer (KYC) policies and procedures in compliance with the Law of Georgia on Facilitating the Suppression of Money Laundering and the Financing of Terrorism and relevant NBG regulations.
- This includes:
- Customer due diligence (CDD) and enhanced due diligence (EDD) procedures.
- Transaction monitoring.
- Reporting of suspicious transactions (STRs) to the Financial Monitoring Service of Georgia (FMS).
- Risk assessment frameworks (business-wide and customer-specific).
- Appointment of an AML/CFT officer.
- Record-keeping.
- Sanctions screening.
- Local Presence:
- A significant local presence is required, including:
- A registered office in Georgia.
- Local management (e.g., general director, compliance officer) that is "fit and proper" and resident in Georgia.
- Operational infrastructure within Georgia.
- A significant local presence is required, including:
- Management and Governance:
- Fit and Proper Requirements: All management board members, supervisory board members, and significant shareholders must meet "fit and proper" criteria, including having relevant experience, no criminal record, and demonstrating good repute.
- Organizational Structure: A clear and effective governance structure, internal control mechanisms, risk management systems, and audit functions must be in place.
- IT and Security Infrastructure:
- Robust and secure IT systems, data protection measures, cybersecurity protocols, and business continuity plans (BCP) and disaster recovery plans (DRP) must be established to protect client assets and data.
- Independent security audits may be required.
- Business Plan: A detailed business plan outlining the intended services, target market, operational model, technological infrastructure, and financial projections.
- Internal Rules and Policies: Comprehensive internal rules and procedures covering all operational aspects, including client onboarding, transaction execution, asset safeguarding, complaints handling, and compliance.
- Professional Indemnity Insurance: The NBG may require specific insurance coverage.
Application Process
The application process for a VASP authorization typically involves several stages:
- Pre-Application Consultation (Recommended): Applicants may engage with the NBG to discuss their proposed business model and clarify regulatory requirements. While not always mandatory, it can streamline the process.
- Preparation of Application Documents: This is the most extensive phase, involving the compilation of:
- Formal application form.
- Detailed business plan.
- Financial projections (usually for 3-5 years).
- Proof of share capital.
- AML/CFT policies and procedures manual.
- Organizational chart.
- Resumes and "fit and proper" declarations for key personnel and significant shareholders.
- Evidence of IT and cybersecurity infrastructure.
- Internal rules, risk management policies, and operational manuals.
- Legal documents of the Georgian entity (charter, registration certificates).
- Proof of office space.
- Any other documentation as required by NBG resolutions.
- Submission of Application: The complete application package is submitted to the NBG. An application fee is typically required.
- NBG Review and Due Diligence:
- The NBG reviews the application for completeness and compliance with all requirements.
- They may request additional information, clarifications, or amendments to the submitted documents.
- Interviews with key personnel may be conducted.
- On-site inspections of proposed operational facilities may occur.
- Decision:
- If satisfied, the NBG issues the VASP authorization.
- If the application is rejected, the NBG provides reasons for the refusal.
- Post-Authorization Obligations: Once authorized, VASPs are subject to ongoing supervisory obligations, including regular reporting to the NBG and the FMS, compliance with all relevant regulations, and potential on-site inspections.
Specific Regulatory References with URLs
Finding direct official English translations of Georgian laws and resolutions on government websites can sometimes be challenging. The primary sources are usually in Georgian. However, here are the key references:
Law of Georgia on Virtual Assets (June 2023):
- This is the foundational law. It sets out the definition of VASPs, the requirement for authorization, NBG's supervisory powers, and general principles.
- Official Source (Georgian Parliament): https://matsne.gov.ge/ka/document/view/5895028?publication=0
- Note: An official English translation may be available via subscription legal databases or through the NBG website's English section once fully implemented and stable.
National Bank of Georgia Resolution N133/04 on Approving the Rules for Licensing and Supervision of Virtual Asset Service Providers (November 29, 2023):
- This resolution provides the detailed rules for how the Law on Virtual Assets is implemented, including specific requirements for licensing, minimum capital, fit and proper tests, operational standards, reporting, and supervision.
- Official Source (NBG, likely on their resolutions page or Matsne): https://matsne.gov.ge/ka/document/view/6064360?publication=0
- Note: This resolution is critical for understanding the practical requirements.
Law of Georgia on Facilitating the Suppression of Money Laundering and the Financing of Terrorism (AML/CFT Law):
- This law governs the general AML/CFT obligations for all obligated entities in Georgia, including VASPs.
- Official Source (Georgian Parliament): https://matsne.gov.ge/ka/document/view/154749?publication=8
- Note: Specific NBG regulations for VASPs will build upon this general law.
National Bank of Georgia Official Website:
- The NBG's official website is the primary source for updated information, press releases, and publications related to financial regulation. Look for sections on "Financial Sector Supervision" or "Virtual Assets."
- English Version: https://nbg.gov.ge/en/
Important Note: The regulatory landscape for virtual assets is dynamic. It is crucial for any entity considering VASP operations in Georgia to seek up-to-date legal advice from local experts to ensure full compliance with the latest regulations and interpretations by the National Bank of Georgia. The information above is a general overview and may not cover every specific detail.
Source Data
**National Bank of Georgia (NBG)**: The central bank is the sole licensing and supervisory authority for VASPs in Georgia.
**Exchange between virtual assets and fiat currencies.**
**Exchange between one or more forms of virtual assets.**
**Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets (custody services).**
**Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.**
This falls directly under points 1 and 2 of the VASP definition.
**Custody Providers (Virtual Asset Custody Providers):**
This falls directly under point 4 of the VASP definition.
If a payment processor *only* handles fiat currency payments for the purchase of virtual assets (e.g., a traditional payment gateway facilitating fiat payments to an exchange), it might primarily fall under general payment service regulations, but the *connection* to virtual assets will still bring it under the NBG's scrutiny regarding AML/CFT for VASPs. However, if they directly facilitate VA transfers or exchanges as part of their payment service, a VASP license is required.
**Legal Entity:** The applicant must be a legal entity registered in Georgia.
Applicants must meet minimum share capital requirements. The specific amounts are typically defined in NBG resolutions.
As of recent implementations, the required share capital for a VASP is **1,000,000 GEL** (Georgian Lari).
In addition, VASPs must maintain sufficient **operational capital** to cover their operational risks and costs.
Applicants must establish and implement robust Anti-Money Laundering (AML) and Know Your Customer (KYC) policies and procedures in compliance with the **Law of Georgia on Facilitating the Suppression of Money Laundering and the Financing of Terrorism** and relevant NBG regulations.
Customer due diligence (CDD) and enhanced due diligence (EDD) procedures.
Reporting of suspicious transactions (STRs) to the Financial Monitoring Service of Georgia (FMS).
Risk assessment frameworks (business-wide and customer-specific).
Local management (e.g., general director, compliance officer) that is "fit and proper" and resident in Georgia.
**Fit and Proper Requirements:** All management board members, supervisory board members, and significant shareholders must meet "fit and proper" criteria, including having relevant experience, no criminal record, and demonstrating good repute.
**Organizational Structure:** A clear and effective governance structure, internal control mechanisms, risk management systems, and audit functions must be in place.
Robust and secure IT systems, data protection measures, cybersecurity protocols, and business continuity plans (BCP) and disaster recovery plans (DRP) must be established to protect client assets and data.
**Business Plan:** A detailed business plan outlining the intended services, target market, operational model, technological infrastructure, and financial projections.
**Internal Rules and Policies:** Comprehensive internal rules and procedures covering all operational aspects, including client onboarding, transaction execution, asset safeguarding, complaints handling, and compliance.
**Professional Indemnity Insurance:** The NBG may require specific insurance coverage.
**Pre-Application Consultation (Recommended):** Applicants may engage with the NBG to discuss their proposed business model and clarify regulatory requirements. While not always mandatory, it can streamline the process.
**Preparation of Application Documents:** This is the most extensive phase, involving the compilation of:
Resumes and "fit and proper" declarations for key personnel and significant shareholders.
Internal rules, risk management policies, and operational manuals.
Legal documents of the Georgian entity (charter, registration certificates).
Any other documentation as required by NBG resolutions.
**Submission of Application:** The complete application package is submitted to the NBG. An application fee is typically required.
The NBG reviews the application for completeness and compliance with all requirements.
They may request additional information, clarifications, or amendments to the submitted documents.
On-site inspections of proposed operational facilities may occur.
If the application is rejected, the NBG provides reasons for the refusal.
**Post-Authorization Obligations:** Once authorized, VASPs are subject to ongoing supervisory obligations, including regular reporting to the NBG and the FMS, compliance with all relevant regulations, and potential on-site inspections.
This is the foundational law. It sets out the definition of VASPs, the requirement for authorization, NBG's supervisory powers, and general principles.
*Official Source (Georgian Parliament):* https://matsne.gov.ge/ka/document/view/5895028?publication=0
*Note:* An official English translation may be available via subscription legal databases or through the NBG website's English section once fully implemented and stable.
**National Bank of Georgia Resolution N133/04 on Approving the Rules for Licensing and Supervision of Virtual Asset Service Providers (November 29, 2023):**
This resolution provides the detailed rules for how the Law on Virtual Assets is implemented, including specific requirements for licensing, minimum capital, fit and proper tests, operational standards, reporting, and supervision.
*Official Source (NBG, likely on their resolutions page or Matsne):* https://matsne.gov.ge/ka/document/view/6064360?publication=0
*Note:* This resolution is critical for understanding the practical requirements.
**Law of Georgia on Facilitating the Suppression of Money Laundering and the Financing of Terrorism (AML/CFT Law):**
This law governs the general AML/CFT obligations for all obligated entities in Georgia, including VASPs.
*Note:* Specific NBG regulations for VASPs will build upon this general law.
The NBG's official website is the primary source for updated information, press releases, and publications related to financial regulation. Look for sections on "Financial Sector Supervision" or "Virtual Assets."
**National Bank of Georgia (NBG):** This is the primary regulator responsible for the licensing, supervision, and regulation of Virtual Asset Service Providers (VASPs). The NBG issues secondary legislation (rules, decrees) to implement the VASP law.
*Official Website:* National Bank of Georgia
**Financial Monitoring Service of Georgia (FMS):** While the NBG licenses and supervises, the FMS is the financial intelligence unit responsible for receiving, analyzing, and disseminating suspicious transaction reports related to money laundering and terrorist financing, including those from VASPs.
*Official Website:* Financial Monitoring Service of Georgia
**Ministry of Finance:** Primarily responsible for tax policy regarding virtual assets.
**Law of Georgia on Virtual Asset Service Providers (VASP Law)**
**Effective Date:** March 1, 2024
Defines "virtual asset" and "virtual asset service provider" (VASP).
Mandates licensing and registration for all entities operating as VASPs (e.g., virtual asset exchanges, custodians, brokers).
Establishes comprehensive AML/CFT obligations for VASPs, including customer due diligence (CDD), record-keeping, suspicious transaction reporting (STR), and sanctions screening.
Grants the National Bank of Georgia the authority to issue licenses, conduct supervision, set capital requirements, and enforce compliance.
Includes provisions for consumer protection and market integrity.
*Reference (While an official English translation of the enacted law might not be readily available on a single NBG page, its passage and content are widely reported by NBG and legal firms):*
NBG Statement on Adoption of VASP Law (July 2023)
PwC Summary on Georgia's VASP Law (March 2024) (Provides a good overview of the law's content and effective date)
**Law of Georgia on Facilitating the Prevention of Illicit Income Legalization (Money Laundering) and Terrorism Financing (AML/CFT Law)**
**Date:** Most recent major revision in 2019 (No. 4930-IIს)
**Key Provisions:** This overarching law establishes the general AML/CFT framework in Georgia, to which VASPs are now explicitly subject under the VASP Law. It defines reporting entities, obligations for customer identification, record-keeping, and reporting of suspicious activities to the FMS.
*Reference (Official source for Georgian legislation - may require translation):* The Legislative Herald of Georgia (Mtsignobartukhutsesi)
**Licensing is Mandatory:** As of March 1, 2024, entities operating as Virtual Asset Service Providers (VASPs) in Georgia are **required to obtain a license from the National Bank of Georgia (NBG)**. This includes:
Exchanges facilitating the trade of virtual assets for fiat currency or other virtual assets.
Platforms offering virtual asset transfers.
Providers of other financial services related to virtual assets.
**Supervision and Compliance:** Licensed VASPs are subject to ongoing supervision by the NBG and must comply with stringent AML/CFT requirements, capital adequacy rules, and other prudential standards.
**Penalties for Non-Compliance:** Operating as a VASP without a license can lead to significant penalties, including fines and potential criminal charges.
**Individual Trading:** The VASP Law primarily targets service providers. Individual participation in virtual asset trading for personal use is not banned, but individuals engaging with unlicensed VASPs do so at their own risk. All transactions with licensed VASPs, however, will be subject to the VASP's AML/CFT procedures.
**Taxation:** The Ministry of Finance generally treats virtual assets as property for tax purposes, and capital gains from their sale are typically subject to income tax.
*Official Source (Georgian Parliament):* https://matsne.gov.ge/ka/document/view/154749?publication=8
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