Cryptocurrency Regulations in Georgia Prior to 2023

Before 2023, Georgia emerged as a notable player in the global cryptocurrency landscape, characterized by its liberal approach towards the crypto industry and the absence of restrictive legislative frameworks. This environment facilitated the growth of cryptocurrency-related activities in the country.

Lack of Legislative Restrictions for Crypto Exchange: Georgia did not impose any legislative restrictions on crypto exchange activities. This absence of regulatory barriers meant that there was no requirement for licenses to engage in crypto exchange activities. Georgia’s approach was more liberal compared to many other countries, positioning it as one of the top cryptocurrency-friendly nations globally​​.

Taxation Policy for Cryptocurrency: On June 28, 2019, the Minister of Finance of Georgia, Nodar Khaduri, signed a bill specifically addressing the taxation of cryptocurrency. The key provisions of this bill were:

Individuals in Georgia were exempt from income tax on profits received from the sale of cryptocurrency.

The sale or exchange of cryptocurrency for the Georgian Lari or other currencies was not subject to Value-Added Tax (VAT). This applied to transactions between legal entities and individuals.

The sale of computing power (hash) from Georgia to foreign entities was not subject to VAT. Additionally, both individuals and legal entities retained the right to input VAT.

Conversely, the sale of computing power within the territory of Georgia (between residents) was subject to VAT.

The purchase of hash by a Georgian resident from abroad was also subject to VAT​​.

Regulatory Changes in 2023: In 2023, regulations were harmonized, introducing significant changes to the crypto landscape in Georgia. Starting from January 1, 2023, companies operating in the crypto field were required to register with the National Bank as virtual asset service providers. This marked a departure from the previously more relaxed regulatory environment where anyone could carry out crypto activities in Georgia without the need for a separate license. The legislation was influenced by the European MiCA (Markets in Crypto-assets) regulations and aimed to be transparent, uniform, and secure. These changes indicated a shift towards more stringent oversight and regulation of the cryptocurrency industry in Georgia​​.

In summary, prior to 2023, Georgia maintained a favorable environment for cryptocurrency activities, largely due to its lack of restrictive laws and beneficial tax policies for crypto businesses. This approach contributed to significant participation in cryptocurrency mining and trading within the country. However, the introduction of new regulations in 2023 marked a shift towards more rigorous oversight, aligning Georgia’s cryptocurrency landscape with broader European regulatory standards.