It’s not enough precise to describe a regulatory application like “We’re the first to launch our cryptocurrency platform”.
Are customers able to exchange crypto in exchange for fiat currencies? Does the platform transfer virtual assets? Do they have control over the wallets of clients and private keys? Are they managing a digital asset lending platform that issues tokens or overseeing a trading system?
The differences in these two areas are crucial when you seek cryptocurrency licenses in Georgia because the services a business plans to offer influence its regulatory preparation documents, controls, as well as capital requirements.
Georgia might be an appealing location for fintech firms but to enter its virtual-asset marketplace now requires more than just registering a business and creating a web site.
Definition of the service
Under the framework described by PB Services, businesses providing covered virtual-asset services for third parties must register as virtual asset service providers with National Bank of Georgia.
This covers virtual asset transfer and exchange, the administration of trading platforms, and the management or custody of cryptocurrency. As per the regulations provided the concept of custody encompasses administration of the customer’s private key and wallet.
That makes the technical design of a crypto product relevant to its regulatory position.
A founder interested in obtaining a crypto license in Georgia should therefore map the proposed customer journey before preparing the application. What happens when a customer makes a deposit of funds? Who owns the account? Can assets be exchanged, or transferred? Who is the entity that approves the transaction?
A clear understanding of the answers is helpful to clarify what the company will actually accomplish.
Your business plan should describe an actual business
VASP applications require more than just an appealing pitch deck.
The National Bank will expect a complete business plan that contains projections of financials for minimum three years. It should include the growth, expense and revenue projections. The plan must also indicate an actual intention to operate in Georgia.
This is a requirement that needs to be considered early.
A business model designed to be used by investors addresses questions like how fast the company’s growth rate can be accelerated. The business plan that is regulated must also describe how the operation is to be run responsibly.
Companies that are looking for a license to use vasp Georgia applicants must be able to link the commercial model to the compliance model instead of considering them separate documents.
AML is not able to be added at the end
PB Services has described the preparation process as an important part of which are the controls against terrorist financing and money laundering.
The document warns that the import of an AML Policy from another jurisdiction will not suffice because Georgian rules must be incorporated into a business’s framework.
The operational systems matter too. The business plan should demonstrate that the systems of the company can detect suspicious transactions.
Practically, the quality of a platform must affect its development prior to being released. It is not recommended to create a platform prior to deciding on how AML policies will be implemented. This could result in costly redesigns and delays.
The Services You Choose Can Change Your Capital
Capital for regulatory purposes is another reason to determine the business model in advance.
Based on the requirements set in the document Exchange and transfer activities which include kiosks, are required to be 150,000 GEL. Management of trading platforms requires 350,000 GEL however other covered services require only 250,000 GEL. The highest threshold applies when multiple services are provided.
This is distinct from normal capital investment or operating capital. The application has to be accompanied by proof of the amount requested has been funded.
A founder who is planning to apply for a crypto blockchain license in Georgia needs to consider regulatory capital in the course of financial planning, not until the rest of the application is completed.
Registration isn’t enough to complete the Compliance Work
The calendar of compliance does not end when you have approval. The required requirements outline ongoing obligations in risk management and cybersecurity, technology resilience fraud risk as well as record retention, independent review and complaints from customers.
A risk-management system is one example. It must receive an opinion by an independent auditor within a months of its registration. According to the rules, companies must take complaints in oral or written form and examine them within a month. They must also send statistics of complaints to the National Bank electronically each month.
These details affect the way serious applicants should approach licensing.
Imagine an Georgian VASP Application as the look of a regulated business.
The company structure, service model technology, structure, AML controls, capital regulations processes, risk management, and the customer’s processes must connect.
Georgia is continuing to provide opportunities for fintech and crypto companies. Its regulatory framework is a well-defined path to market. The best place to start is to not ask about what speed a license is going to be issued.
It’s explaining in clear terms what your cryptocurrency business plans to be doing and proving that the company is prepared to operate within Georgia’s legal framework.