Is crypto legal in Georgia?
Since 2020, Georgia has maintained a leading position in attracting crypto investments. This can be attributed to several factors: the availability of inexpensive electricity for mining, limited legislative restrictions on the circulation of digital tokens, and the confidentiality of information held by local banks regarding international financial flows. Additionally, cryptocurrencies are not considered legal tender here, hence their circulation and usage remain relatively unregulated. Consequently, from a legal standpoint, there exists substantial freedom for investors and miners alike. But what is the current situation? Is cryptocurrency and its operations permitted in Georgia?
Regulation of Digital Token Circulation
In the fall of 2022, Georgia passed its first cryptocurrency law. This law neither prohibits nor explicitly permits the circulation of tokens. However, it does introduce taxation for miners and crypto investors, both for mining activities and the exchange of tokens for fiat currencies. Furthermore, in September 2023, a law will come into effect, analogous to the European VASP regulations concerning crypto assets.
Afterward, operations involving cryptocurrencies will not be prohibited. Nevertheless, the activities of various exchanges and investment institutions will become more transparent as they will be subject to defined obligations and legal norms. Their primary objective will be to prevent the illicit laundering of fiat currency, which theoretically could be used to sponsor terrorism. However, this will primarily affect larger operations. In other words, companies engaging in transactions with digital coins will be required to track the legitimacy of these transactions. And in the case of any suspicions of unlawful financial activities, they must report them to regulatory authorities.
Attitude towards Cryptocurrency
Overall, cryptocurrency is increasingly garnering interest from investors in Georgia. Recognizing this trend, the National Bank of Georgia plans to introduce the "digital lari." This will not be cryptocurrency in the traditional sense, but rather an internal central bank digital currency (CBDC) built on blockchain technology. This lays the foundation for the assumption that cryptocurrency will gain even more popularity in Georgia in the future. The active opening of free industrial zones is also expected to contribute to this popularity.
What are Free Industrial Zones (FIZ)?
Direct cryptocurrency regulation does not exist in Georgia. However, there are so-called "free industrial zones." These are areas where one can obtain a conditional crypto license and benefit from favorable tax conditions. Currently, such FIZs are active in Tbilisi, Kutaisi, and Poti. In these cities, cryptocurrency ATMs have also begun to appear. However, for significant transactions, verification is required, involving the scanning of passports and residence permits. Additionally, the exchange rate may not always be favorable for end-users.
The license provided to companies within Free Industrial Zones (FIZs) grants the following rights for the utilization of cryptocurrency in Georgia:
1. Integration and unrestricted use of acquiring systems for fiat settlements.
2. Issuance of digital money recognized as a means of payment.
3. Execution and servicing of transactions using both fiat (bank transfers) and electronically emitted funds.
In essence, these FIZ industrial zones are territories where highly accommodating conditions will be created for the establishment of exchanges and mining centers.
Taxation on Cryptocurrency Sales
For individuals in Georgia, cryptocurrency operations are subject to taxation only if the source of income is within the country's territory. Essentially, only legal entities and miners will be required to pay taxes to the state. Similar rules apply to computational power sellers.
The following norms apply (in accordance with Article 166 of the Georgian Tax Code):
- If computational power is sold to a non-resident, VAT is not applied.
- If computational power is purchased from a non-resident, VAT is applied.
- If the sale or purchase occurs between Georgian residents, VAT is also applied.
Furthermore, the income tax in this case amounts to only 10% of the profit derived from using the computational power.
How to Legally Exchange Cryptocurrency?
So, is cryptocurrency permitted in Georgia? Since it is not classified as legal tender, its circulation cannot be restricted. Hence, the use of digital assets is at the discretion of both residents and non-residents.
To exchange tokens for fiat, it can be done through:
- Cryptocurrency ATMs.
- Exchanges.
- Online exchange platforms.
Additionally, our company, GeCrypto, offers cryptocurrency-to-fiat exchange services. We have branches in Tbilisi, Istanbul, and 30 other cities worldwide. Every client can approach any of our locations to exchange tokens for cash in any volume. The client only needs to specify the country, desired currency, and amount. A company representative will then find the best exchange option in the current location, all without any bureaucratic complexities.
Regulation of Digital Token Circulation
In the fall of 2022, Georgia passed its first cryptocurrency law. This law neither prohibits nor explicitly permits the circulation of tokens. However, it does introduce taxation for miners and crypto investors, both for mining activities and the exchange of tokens for fiat currencies. Furthermore, in September 2023, a law will come into effect, analogous to the European VASP regulations concerning crypto assets.
Afterward, operations involving cryptocurrencies will not be prohibited. Nevertheless, the activities of various exchanges and investment institutions will become more transparent as they will be subject to defined obligations and legal norms. Their primary objective will be to prevent the illicit laundering of fiat currency, which theoretically could be used to sponsor terrorism. However, this will primarily affect larger operations. In other words, companies engaging in transactions with digital coins will be required to track the legitimacy of these transactions. And in the case of any suspicions of unlawful financial activities, they must report them to regulatory authorities.
Attitude towards Cryptocurrency
Overall, cryptocurrency is increasingly garnering interest from investors in Georgia. Recognizing this trend, the National Bank of Georgia plans to introduce the "digital lari." This will not be cryptocurrency in the traditional sense, but rather an internal central bank digital currency (CBDC) built on blockchain technology. This lays the foundation for the assumption that cryptocurrency will gain even more popularity in Georgia in the future. The active opening of free industrial zones is also expected to contribute to this popularity.
What are Free Industrial Zones (FIZ)?
Direct cryptocurrency regulation does not exist in Georgia. However, there are so-called "free industrial zones." These are areas where one can obtain a conditional crypto license and benefit from favorable tax conditions. Currently, such FIZs are active in Tbilisi, Kutaisi, and Poti. In these cities, cryptocurrency ATMs have also begun to appear. However, for significant transactions, verification is required, involving the scanning of passports and residence permits. Additionally, the exchange rate may not always be favorable for end-users.
The license provided to companies within Free Industrial Zones (FIZs) grants the following rights for the utilization of cryptocurrency in Georgia:
1. Integration and unrestricted use of acquiring systems for fiat settlements.
2. Issuance of digital money recognized as a means of payment.
3. Execution and servicing of transactions using both fiat (bank transfers) and electronically emitted funds.
In essence, these FIZ industrial zones are territories where highly accommodating conditions will be created for the establishment of exchanges and mining centers.
Taxation on Cryptocurrency Sales
For individuals in Georgia, cryptocurrency operations are subject to taxation only if the source of income is within the country's territory. Essentially, only legal entities and miners will be required to pay taxes to the state. Similar rules apply to computational power sellers.
The following norms apply (in accordance with Article 166 of the Georgian Tax Code):
- If computational power is sold to a non-resident, VAT is not applied.
- If computational power is purchased from a non-resident, VAT is applied.
- If the sale or purchase occurs between Georgian residents, VAT is also applied.
Furthermore, the income tax in this case amounts to only 10% of the profit derived from using the computational power.
How to Legally Exchange Cryptocurrency?
So, is cryptocurrency permitted in Georgia? Since it is not classified as legal tender, its circulation cannot be restricted. Hence, the use of digital assets is at the discretion of both residents and non-residents.
To exchange tokens for fiat, it can be done through:
- Cryptocurrency ATMs.
- Exchanges.
- Online exchange platforms.
Additionally, our company, GeCrypto, offers cryptocurrency-to-fiat exchange services. We have branches in Tbilisi, Istanbul, and 30 other cities worldwide. Every client can approach any of our locations to exchange tokens for cash in any volume. The client only needs to specify the country, desired currency, and amount. A company representative will then find the best exchange option in the current location, all without any bureaucratic complexities.
