It’s not accurate enough to describe a regulatory application as “We’re launching our cryptocurrency platform”.
Customers can convert cryptocurrency to fiat? Can the platform transfer virtual assets? Does the company have control over client wallets or private keys? Are they managing an exchange platform and lending against digital assets or planning to issue tokens?
These differences are important when applying for a crypto-license in Georgia as the type of products and services a business plans to provide will impact its legal requirements and documentation, as well as control and capital requirements.
Georgia could be a desirable environment for fintech businesses however, gaining access to its controlled virtual-asset market today requires more than simply registering your company and creating a website.
The definition of the service
Businesses offering virtual assets to third parties must become Virtual Asset Service Providers at the National Bank of Georgia under the guidelines laid out by PB Services.
This includes the transfer of virtual assets, exchange, the administration of trading platforms, and the administration or custody of cryptocurrency. In addition, as per the regulatory information supplied the concept of custody encompasses administration of a customer’s private keys and wallet.
This makes the design of the crypto-product relevant to its regulatory status.
Anyone who wants to obtain the crypto license in Georgia should therefore map the customer journey they intend to take before creating the application. What happens after a user deposits funds? Who controls the wallet? Can assets be exchanged or transferred? Which party authorizes the transactions?
Clear answers help establish what the business is actually going to be doing.
Your business plan must describe a real business
A VASP application also requires more than a beautiful pitch deck.
The National Bank will expect a complete business plan that contains financial projections for minimum three years. This must include income, expenses and growth estimates. The plan must also demonstrate a real intent to operate within Georgia.
This is a requirement that needs to be considered early.
A business plan designed for investors will address questions such as: How fast can the company grow? The business plan that is regulated must explain how the business is to be run responsibly.
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 cannot be added at the end
The Anti-Money Laundering as well as the Counter-Terrorism Financing control is among the most important components of the preparation as described by PB Services.
The information warns explicitly that importing an AML Policy from a different jurisdiction will not be enough as Georgian regulations must be integrated into a company’s framework.
The operational systems matter too. The business plan must demonstrate that the company’s systems can detect similar and suspicious transactions right from the beginning.
Compliance must be a consideration in product development. In the process of creating a platform and then deciding how AML works and how it will work, you could cause delay and unnecessary changes.
Capital Depends on the Services You Select
Knowing the business model as early as possible is essential for a variety of reasons, not least the need for regulatory capital.
Under the thresholds provided in the sources Exchange and transfer activities which include kiosks, are required to be 150,000 GEL. Administration of the trading platform requires 350,000 GEL while other covered services need 250,000 GEL. The highest threshold is required for multiple services.
This is different from regular operating or investment capital. Documentation that proves the required amount has actually been funded must accompany the application, and the capital needs to be maintained throughout operations.
A founder who is planning to apply for a crypto-blockchain license in Georgia is required to think about regulatory capital prior to the start of financial planning, not until after the remainder of the application is complete.
Registration isn’t enough to complete the Compliance Work
The compliance calendar will not disappear with the date of approval. The provided requirements detail continuing obligations in cybersecurity and risk management, technology resilience and risk of fraud as well as the retention of records, independent reviews and customer complaints.
For example an independent auditor’s report on the risk management framework should be obtained within 12 months from the time of registration. According to the rules, businesses are required to accept complaints in oral or written form and then review them within a month. Additionally, they must send statistics of complaints to the National Bank electronically each month.
These particulars affect the manner serious applicants should be approached when seeking licensing.
Imagine an Georgian VASP Application as the design of an regulated business.
It is important that the structure of the company as well as the technology used, AML controls and regulatory capital, along with customer processes, are all in perfect alignment.
Georgia continues to present opportunities for fintech and crypto businesses. Additionally, its regulatory framework provides a defined way to enter the market. The best place to begin is to inquire about what speed a license is going to be issued.
You must be able to explain in detail how your crypto-business’s goals are and prove that you are prepared to adhere to Georgia’s rules.