Georgia -- Regulatory Status Regulatory Overview

Georgia has significantly advanced its regulatory framework for virtual assets, moving from a largely unregulated environment to a comprehensive regime, primarily driven by international standards set by the Financial Action Task Force (FATF).

Current Cryptocurrency/Virtual Asset Regulatory Status in Georgia

1. Regulatory Approach: Comprehensive (for Virtual Asset Service Providers)

Georgia has adopted a comprehensive regulatory approach, particularly for Virtual Asset Service Providers (VASPs). This framework focuses on anti-money laundering and countering the financing of terrorism (AML/CFT), consumer protection, market integrity, and financial stability. It mandates licensing and supervision by the National Bank of Georgia for entities involved in virtual asset services.

2. Primary Regulatory Bodies:

• 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.

3. Key Legislation Names and Dates:

The cornerstone of Georgia's virtual asset regulation is the Law of Georgia on Virtual Asset Service Providers (VASP Law), which complements existing AML/CFT legislation.

• Law of Georgia on Virtual Asset Service Providers (VASP Law)

  • Date Passed: July 20, 2023
  • Effective Date: March 1, 2024
  • Key Provisions:
    • 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)

4. Current Stance on Crypto Trading and Exchanges:

• 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.
  • Custodians of virtual assets.
  • 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.

In summary, Georgia has established a robust and comprehensive regulatory framework for virtual asset service providers, positioning itself as a jurisdiction committed to international best practices in virtual asset regulation, especially concerning AML/CFT.