Crypto regulations in Georgia 2024

Georgia, a transcontinental country in Eastern Europe and Western 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 introduced pioneering policy at 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

Although 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 sees 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 that are consistent with international standards set by the Financial Action Task Force. This regulation is primarily aimed at virtual asset service providers (VASPs).

1.1. New Crypto Regulation in Georgia: Key Details

As of 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 by 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 27, 2023: Binance opened a new blockchain hub in Georgia to promote crypto adoption and industry education. April 19, 2023: Gate Pay, a service of Gate.io, has partnered with CityPay.io to offer crypto payment options at over 600 merchants in Georgia. May 31, 2023: Tether invested in CityPay.io, which enables USDT payments in multiple locations across Georgia. June 28, 2023: Tether signed an MOU with the Georgian government to position the country as a hub for P2P technology. 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. March 19, 2024: The IMF highlighted the need for strong regulations and AML/CFT controls in Georgia, focusing on managing risks in the financial sector, including virtual assets.

3. Georgia’s Crypto Tax 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 favorite destination for crypto enthusiasts.

For a registered crypto business, things are a bit 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 those profits are distributed to the owners.

Do not worry. There is a policy in the country meant to support small businesses. If your business qualifies for small business status, you can do business paying only a 1% tax on profits.

It is not easy to be qualified for the status. If the National Bank of Georgia classifies crypto trading as a currency operation, it may disqualify you from SBS benefits. In addition, there is an annual turnover limit for SBS; exceeding this limit means the loss of 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 more than 200,000 crypto miners were operating in the country.

To legally mine crypto, you need a registered business in Georgia. Legal entities involved in mining can benefit from the country’s commercial electricity tariffs. However, crypto mining is not tax free. Legal mining companies face an income tax of 20%, a minimum profit tax of 15% and almost 5% dividend tax. Many mining companies take advantage of tax breaks available in free industrial zones, such as Tbilisi, Poti and Kutaisi.

5. Timeline of Crypto Regulations in Georgia

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

2019: Nodar Khaduri, the then finance minister of Georgia, signed a bill introducing taxes for cryptocurrency.

2023: The National Bank of Georgia introduced new regulations for virtual asset service providers.

2024: The new crypto regulations are implemented. These developments brought the country into line with guidelines for the Financial Action Task Force.

End note

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 such as 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 affect its financial landscape and crypto-regulatory environment. Only time will tell how these regulations will affect the industry.

Also see: Crypto Regulations in Puerto Rico 2024