Georgian central bank prepares legislation to regulate the crypto market

The tiny nation in the Caucasus accounts for almost 1% of Bitcoin mining and has over $1 million in under regulated crypto turnover monthly.

Georgia, the country on the Black Sea, is preparing to regulate its cryptocurrency market. National Bank of Georgia Governor Koba Gvenetadze told The Financial on Monday that the central bank has already developed draft regulatory legislation in accordance with the requirements of international agencies.

Gvenetadze said the size of the Georgian crypto market is unknown, due to the lack of regulation. However an estimate by Moneyval, the Council of Europe money laundering monitoring body, placed its monthly transaction volume at between 3.5 million and 5 million Georgian lari, or $1.09 million to $1.64 million USD, monthly as of September 2020. Moneyval urged Georgian authorities to “strengthen the practical application of their measures to combat money laundering and financing of terrorism” at that time.

The coming legislation complies with international Financial Action Task Force (FATF) requirements, the central banker continued, and was written with assistance from International Monetary Fund (IMF) staff. Currently, financial institutions in Georgia are not allowed to provide virtual asset exchange and transfer services, and clients engaged in activities with virtual assets are considered high-risk and are “subject to appropriate enhanced preventive measures.”

Gvenetadze did not specify a date for the introduction of the regulatory legislation into parliament.

Georgia has long had a crypto mining sector. The country accounts for almost 1% of the total Bitcoin hash rate – an exceptional showing for a country with a population under 4 million. It has plentiful hydropower, although power shortages in the remote Svaneti region over the winter were attributed to illegal private crypto mining activities. Desperate to curtail the harmful practice, the national church stepped in to provide a spiritual injunction against it. Electricity is provided to private residences in the region for free as part of an attempt to retain population.