Navigating the Registration and Regulation of Virtual Asset Service Providers in Georgia
In recent years, Georgia has positioned itself as a burgeoning hub for fintech and blockchain innovations. With the growing interest in virtual assets, the Georgian National Bank (NBG) has implemented a comprehensive regulatory framework to govern Virtual Asset Service Providers (VASPs). This article unpacks the key aspects of the registration and regulation process for VASPs in Georgia, providing insights for businesses and stakeholders.
What Are Virtual Asset Service Providers?
VASPs are entities that offer services involving virtual assets, such as:
Exchange of convertible virtual assets into national or foreign currencies.
Custody or administration of virtual assets.
Management of virtual asset portfolios.
Trading platform administration.
Under Georgian law, VASPs shall operate as legal entities registered within the jurisdiction. This ensures compliance with financial security measures, such as anti-money laundering (AML) and counter-terrorism financing (CTF) requirements.
The Registration Process
The registration of VASPs is a rigorous process designed to ensure transparency and reliability.
Here are the critical steps and requirements:
Application Submission:
Applicants must fill out a detailed registration form and provide a comprehensive list of services.
Information on administrators and significant shareholders is required.
Compliance Documentation:
Proof of identity and qualifications for administrators.
Detailed business plans, including a three-year financial projection.
AML/CTF internal policies tailored to the organization's risk profile.
Technical and Operational Preparedness:
A schematic description of virtual asset operations, from initiation to settlement.
Evidence of ownership or rights to use electronic systems and platforms.
National Bank Review: The NBG has up to 60 days to review submissions. This period can extend under certain conditions, such as requests for additional information.
Regulatory Standards and Obligations
Once registered, VASPs shall adhere to strict operational and ethical standards:
AML and CTF Compliance: Implement robust internal controls to mitigate risks associated with money laundering and terrorist financing.
Transparent Governance: Maintain clear records of ownership and disclose any significant changes to the NBG.
Consumer Protection: Ensure secure handling of client funds and provide transparent communication about services.
Additionally, VASPs are prohibited from engaging in activities such as lending virtual assets or acting as intermediaries for unregistered entities.
Enforcement and Penalties
The NBG has the authority to revoke a VASP’s registration for non-compliance. This includes:
Submission of false or misleading information.
Involvement in financial crimes.
Failure to address operational deficiencies within designated timeframes.
Opportunities and Challenges
Georgia's regulatory environment offers a solid foundation for fostering trust in the virtual asset sector. However, meeting these stringent requirements demands significant preparation and resources from businesses. For international VASPs, the framework provides clarity and a gateway to operate in the Georgian market.
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General Information: The information provided in this article is intended solely for general informational purposes and should not be construed as legal advice. The content is based on the author's understanding of information and relevant laws as of the publication date. It is important to note that laws and regulations are dynamic and can change over time; they may also vary based on location and specific circumstances.
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