It’s not enough precise to describe a regulation application as “We’re the first to launch our cryptocurrency platform”.
Can customers exchange crypto for fiat currency? Will the platform transfer virtual assets? Can the company manage client wallets or private keys? Will it manage a trading platform or lend against digital assets?
Those differences matter when pursuing a crypto license in Georgia because the services a company intends to provide affect its regulatory preparation, documentation, controls, and capital requirements.
Georgia is a fantastic location for fintech firms, but getting into its highly-regulated virtual asset market is more than just registering your business and building a website.
First, you must define the service.
Under the framework described by PB Services, businesses providing covered virtual-asset services for third-party clients must be registered as virtual asset service providers to the National Bank of Georgia.
This includes transfer of virtual assets and exchange, management of trading platforms, and management or custody of cryptocurrency. In addition, the provided regulation states that the concept of custody also applies to administration of a client’s private keys or wallet.
The technical specifications of the cryptocurrency product is important to its place with respect to regulation.
An entrepreneur who is interested in obtaining a crypto licence in Georgia should sketch out the customer’s journey in formulating the request. What happens after a customer makes a deposit? Who is the person who controls the account? Can assets be exchanged for or transferred? Which person is authorized approve transactions?
It is important to be clear in your answers to establish what the firm will do.
Your Business Plan Should Describe the Real Business
A VASP application also requires more than an attractive pitch deck.
Based on the information provided The National Bank expects a detailed business plan containing financial projections of at least 3 years, which includes revenues, expenses, as well as growth forecasts. The plan should also show genuine intent to be a business in Georgia.
It is essential to deal with this issue as soon as possible.
A business model designed for investors will answer questions about how quickly the company’s growth rate can be accelerated. A business plan for any regulatory activity must include details about how the operation will be conducted responsibly.
Georgians who apply for a vasp licence shouldn’t treat the commercial model as though it was unrelated. Instead they should join them.
AML Cannot Be Added at the End
PB Services describes the preparation as a series of steps that include anti-money laundering and counter-terrorism financing controls.
The document specifically warns against the importation of a policy on AML from a different jurisdiction, as Georgian AML regulations must be integrated into the overall framework of a business.
It is also essential to look at the operational systems. The business plan needs to demonstrate that the system of the business can detect similar and suspicious transactions right from the beginning.
In practical terms it is essential that compliance be a factor in the product’s development prior to its launch. Building a platform first and asking what AML procedures fit later could result in unnecessary rework and cause delays.
Capital Depends on the Services You Choose
Capital for regulatory purposes is another reason to determine the business model in advance.
In accordance with the thresholds specified in the source materials, kiosks and exchange activities are required to be 150 000 GEL. Administration of the trading platform is required to be 350,000 GEL and other covered services need 250,000 GEL. When multiple services are provided, the highest applicable threshold governs.
This is separate from ordinary capital investment or operating capital. Evidence that the required amount is actually financed must accompany the request. Likewise, the capital must be maintained during the entire operation.
The founder who wishes to obtain a crypto-blockchain license in Georgia should consider the regulatory capital in his budgeting before the other aspects have been taken care of.
Registration doesn’t complete the compliance work
The calendar of compliance doesn’t end with approval. It is a requirement that includes regular obligations relating to cybersecurity, risk management and technology resilience. They also include the retention of records, independent review of customer complaints and retention of records.
For example an opinion of an independent auditor regarding the risk-management system must be sought within 12 months of the date of registration. Businesses must also follow the rules set out to handle complaints. They must take complaints seriously, whether they are written, oral or electronic, and to examine the complaints within a maximum of one month period, and provide statistics on complaints electronically to National Bank every month.
These factors affect how serious applicants must approach licensing.
Imagine the Georgian VASP as a concept for a company instead of a collection of forms to be filled out.
The company’s structure, model of service model and technology, AML controls as well the risk management procedures, regulatory capital and customer-facing processes should be in sync.
Georgia offers opportunities to firms in fintech and crypto, and the legal framework offers an easy way to enter the market. However, the best starting point isn’t determining how quickly the license will be granted.
It is essential to define in detail the goals of your crypto-business’s goals are and prove that you are prepared to comply with Georgia’s regulations.