The regulation application should not include the statement “We are launching a cryptocurrency platform”.
Can users exchange crypto to fiat currency? Will the platform be able to transfer virtual assets? Does the company have control over client wallets and private keys? Is it administering the trading platform or lending against digital assets or planning to issue tokens?
These distinctions are crucial when applying for a crypto-license within Georgia, because the services that a company plans to offer will affect its regulatory requirements documents, controls, and capital requirements.
Georgia has a legal market for virtual assets that attracts fintech companies. However, entering this market is more difficult than simply registering your business and launching a website.
First, define the service
Based on the model described by PB Services, businesses providing covered virtual-asset services for third-party clients must be registered as Virtual Asset Service Providers with National Bank of Georgia.
The scope encompasses activities such as virtual-asset exchange and transfer, administration of trading platforms as well as cryptocurrency custody management. In addition, the provided regulation states that the concept of custody also applies to the management of a user’s private key or wallet.
This creates the need for cryptocurrency-related products relevant to their regulation status.
An entrepreneur who is interested in obtaining a crypto licence in Georgia should map the customer’s journey prior to formulating the application. What happens after a user deposits funds? Who is the person who controls the wallet? Can assets be exchanged or transferred? Which party is authorized to authorise transactions?
It is important to know what the business is actually going to be doing.
Your Business Plan must provide a realistic description of your business
A VASP application also requires more than just a nice pitch deck.
Based on the information provided by the National Bank requires a detailed plan of business that contains financial projections spanning the minimum of three years. They include expenses, revenue, and growth expectations. The plan must also demonstrate a real intent to be operational within Georgia.
This is a requirement that must be addressed quickly.
Investors are able to ask questions about how fast the company will expand. A business plan that is regulated must be able to explain how the business will operate in a safe manner.
For companies seeking a vasp license Georgia applicants should be prepared to connect the commercial model with the compliance model rather than treating them as unrelated documents.
AML is not possible to add at the end
PB Services describes the preparation as a series of actions that cover anti-money laundering, as well as anti-terrorism financing controls.
The warnings are specific to the importation of an AML Policy from another country will not be enough as Georgian rules must be incorporated into a business’s framework.
The operational systems must be considered also. Business plans must show that the system of the business can spot related and suspicious transactions from the outset.
It is essential to consider compliance as a consideration in product development. First, establishing a platform and considering what AML procedures fit later could result in unnecessary rework and create delays.
Capital is contingent on the Services you Choose
The need to develop an early business model is also due to capital required by the regulatory authorities.
As per the thresholds set out in the sources Transfer and exchange operations which include kiosks, are required to be 150,000 GEL. Management of a trading platform for trading is required to be 350,000 GEL while other covered services need 250,000 GEL. If several services are offered the threshold which is the highest is used.
It is not the same as operating capital that is used for normal purposes. Proof that the required amount is actually financed must accompany the request. Likewise, the capital needs to be maintained during the entire operation.
A founder who is planning to submit an application for a crypto blockchain license in Georgia should consider regulatory capital in the course of financial planning but not until after the remainder of the application has been completed.
The registration process is not the end of compliance work
The compliance calendar doesn’t disappear with the date of approval. The requirements provided outline the ongoing obligations in risk management, cybersecurity technological resilience and risk of fraud, records retention, independent reviews and complaints from customers.
For instance an independent auditor’s report regarding the risk-management system must be obtained within 12 months from the time of registration. The business must also comply with the described rules regarding handling complaints. They must accept complaints, whether they’re written, verbal or electronic, to review them in a maximum one-month time frame, and to send data on complaints electronically to National Bank every month.
These details can change the way that a serious license applicant takes licensing.
Think of the Georgian VASP as a design for a company instead of a collection of forms that need to be filled out.
It is essential that the company structure along with the technology, AML controls and regulatory capital, in addition to processes for customers, are in perfect alignment.
Georgia offers opportunities to businesses in the field of fintech and crypto and the legal framework provides an open path to entering the market. However, asking when you can receive an approval isn’t the best way to begin.
It is being able, specifically, to explain what your crypto-related business will be doing and be able to demonstrate that the business will be operating within the legal framework of Georgia.
