In Georgia, “virtual asset services” may be provided only by virtual asset service providers (VASPs) registered by the National Bank of Georgia or by financial institutions that have been granted authorization to provide virtual asset services.
What is a virtual asset service?
A virtual asset service means the following services involving a convertible virtual asset:
- exchange between a convertible virtual asset and:
- national or foreign currency;
- another virtual asset; or
- a financial instrument;
- transfer;
- safekeeping/administration (i.e., provision of custodial services);
- portfolio management, other than management of a collective portfolio;
- administration of a virtual asset trading platform;
- lending;
- initial offering;
- services related to an initial offering.
What is a convertible virtual asset?
A convertible virtual asset is a crypto-asset that has an equivalent value in the market and, accordingly, may be exchanged for national or foreign currency, another virtual asset, or a financial instrument.
What requirements apply to virtual asset service providers (VASPs)?
A virtual asset service provider (VASP) is a person that provides virtual asset services for the benefit of another person.
A virtual asset service provider (VASP) may operate only in the form of a limited liability company (LLC) or a joint-stock company (JSC) registered in Georgia.
If a provider has only one shareholder/partner who is also its director, the appointment of a second director is mandatory.
A virtual asset service provider (VASP) must maintain a properly equipped head office in Georgia. In addition, at least one director of the VASP must be physically present in Georgia for at least 14 days during each calendar month.
A virtual asset service provider (VASP) is prohibited from engaging in any activities other than the provision of virtual asset services, necessary ancillary activities, and the exchange of its own virtual assets.
A provider must commence the relevant activities within 6 months of its registration with the National Bank of Georgia. Before commencing its activities, the provider must implement an appropriate software system capable of automatically detecting suspicious and unusual transactions.
A provider is prohibited from providing services involving an “anonymous” cryptocurrency (an anonymity-enhanced coin/privacy coin) or from using technological methods that prevent the identification and traceability of a transaction and the parties involved in it.
A provider must implement an effective system for assessing and managing money laundering and terrorist financing risks, as well as internal control policies, rules, systems, and mechanisms that are proportionate to such risks. In addition, the provider must submit the reports required under the legislation on facilitating the prevention of money laundering and terrorist financing, in the form and at the intervals prescribed by the National Bank of Georgia.
Within 12 months of registration, a provider must establish an adequate risk-management framework, and its compliance with applicable legislation must be confirmed by a qualified audit report.
Requirements applicable to administrators and significant shareholders
Administrators of a virtual asset service provider (VASP)1 must possess the appropriate knowledge and experience necessary to provide virtual asset services. In particular, they must have higher education in one of the following fields: economics, finance, banking, business administration, auditing, accounting, law, information technology, quantitative methods, or another relevant field, or at least 2 years of experience working in a managerial position in the financial or virtual asset service sector.
A person may not serve as an administrator, significant shareholder, or beneficial owner of a VASP if:
- the person has been convicted of a serious or particularly serious crime;
- the person has participated in a transaction that caused significant harm to a VASP or financial institution, infringed the rights of VASP customers, depositors of a financial institution, or other creditors, or resulted in the insolvency of a VASP or financial institution;
- the person has failed or is failing to fulfill one or more financial obligations;
- another circumstance prescribed by law exists.
In addition, an administrator of a VASP may not simultaneously serve as an administrator of another VASP, except where the VASPs concerned are members of the same group.
Capital requirements
The minimum supervisory capital requirements differ depending on the type of virtual asset services provided. Specifically, where a virtual asset service provider (VASP) provides:
- exchange or transfer of a convertible virtual asset, the minimum supervisory capital must be at least GEL 150,000;
- administration of a convertible virtual asset trading platform, the minimum supervisory capital must be at least GEL 350,000;
- other virtual asset services, the minimum supervisory capital must be at least GEL 250,000.2
If a VASP provides more than one type of virtual asset service, the highest applicable amount of supervisory capital shall apply.
How to Apply for Registration as a Virtual Asset Service Provider (VASP)?
An application for registration as a virtual asset service provider must be submitted to the National Bank of Georgia.
The application form must be accompanied by the following documentation:
- an extract from the Registry of Entrepreneurs and Non-Entrepreneurial (Non-Commercial) Legal Entities and, if the applicant is a JSC, additionally, an extract from the Shareholders’ Register;
- a list of the virtual asset services to be provided;
- information about the administrators;
- copies of documents evidencing the identity of the administrators;
- information about significant shareholders and beneficial owners, including documentation enabling the identification of the beneficial owners;
- a table demonstrating the compliance of the submitted documentation with the registration requirements;
- a bank statement confirming the replenishment of the minimum regulatory capital;
- information/documentation regarding the education and work experience of the administrators;
- certificates concerning the criminal records of the administrators, significant shareholders, and beneficial owners;
- information regarding any ownership interests held by the administrators, significant shareholders, and beneficial owners in entities subject to the supervision of the National Bank of Georgia;
- information regarding the past and current business activities and financial standing of the administrators, significant shareholders, and beneficial owners;
- a schematic description of the provision of virtual asset services;
- the organizational structure of the applicant;
- a business plan, including budget projections for at least the following 3 years;
- proof of payment of the registration fee;
- information/documentation concerning the website to be used for providing virtual asset services, if any;
- information concerning the application to be used for providing virtual asset services, if any;
- documentation evidencing the right of ownership or use of the immovable property where the applicant’s head office/branch will be located;
- information about the branches;
- information/documentation regarding the installation of a video-surveillance system, if the applicant intends to conduct exchanges of virtual assets using cash;
- information/documentation, including an extract issued by the relevant registration authority, concerning the manufacturer of the electronic system to be used for providing virtual asset services and the electronic system itself;
- information regarding the contractual relationships of the applicant with virtual asset service providers or payment service providers;
- policies and procedures developed for the purpose of facilitating the prevention of money laundering and terrorist financing;
- a declaration whereby the applicant confirms that it has implemented, or will implement, a compliance control system for the purpose of facilitating the prevention of money laundering and terrorist financing.
The National Bank of Georgia is authorized to request additional information or documentation.
The above documents must be submitted in physical form, either as originals or as notarized copies.
Documents issued in a foreign country must be submitted in duly authenticated form (by apostille or legalization). This requirement does not apply to documents issued in member states of the Minsk Convention (CIS countries).
A decision on the registration of the applicant as a VASP or on the refusal of registration shall be made within 60 days of the submission of the documentation. Where necessary, this period may be extended twice, by an additional 60 calendar days on each occasion.
If the applicant intends to conduct an initial offering of a stable virtual asset, it must additionally submit the documentation prescribed by the National Bank of Georgia.
How much does VASP registration cost?
The registration fee for a virtual asset service provider (VASP) is GEL 5,000.
What additional restrictions and prohibitions are provided by the legislation?
The law imposes certain restrictions on the provision of virtual asset services, including the following prohibited activities:
- lending virtual assets to natural persons;
- providing virtual asset services through an agent;
- when managing a portfolio consisting of convertible virtual assets, receiving a commission, percentage, or any other monetary or non-monetary benefit from any person other than the customer.
Is the exchange of virtual assets through a self-service kiosk permitted?
Yes. In such cases, customer identification/verification must be carried out in accordance with a process agreed with the National Bank of Georgia.
In addition, a virtual asset service provider (VASP) must use the video-surveillance system installed at the self-service kiosk to monitor the kiosk and make the relevant recording from at least the moment the customer approaches the kiosk until the service is completed.
What is a stable virtual asset and how is it initially offered?
A stable virtual asset (stablecoin) means a convertible virtual asset expressed or denominated in units, the value of which is pegged to the value of the Georgian lari, a foreign currency, or another asset, and which may be backed by liquid assets or other assets agreed upon with the National Bank of Georgia.
The rules governing the initial offering of a stable virtual asset are available here.
Where can I find the register of virtual asset service providers (VASPs)?
The list of VASPs currently registered with the National Bank of Georgia can be found here.
For qualified legal advice and assistance with registration as a virtual asset service provider (VASP), contact us today or complete our contact form.
- An “administrator” means a director of a VASP, a member of its supervisory board, where such a board exists, as well as a person who is authorized to assume obligations in the name of the VASP independently or jointly with one or more persons. ↩︎
- These requirements do not apply to the initial offering of a stable virtual asset by a virtual asset service provider. The issuer of a stable virtual asset must maintain minimum supervisory capital of not less than GEL 500,000. ↩︎
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