“We’re in the process of launching a crypto-based platform” isn’t the most precise description of a regulation application.
Can customers convert cryptocurrency to fiat? Can the platform transfer virtual assets? Is the company in control of wallets for clients or keys? Does it plan to administer a trading platform, or loan against digital assets?
These differences are important when obtaining permission to operate a cryptocurrency in Georgia. The services the business plans to offer affects its regulatory preparation, documents and controls as well as capital requirements.
Georgia has a legal market for virtual assets, which is attractive to fintech companies. However, entering this market requires much more effort than simply registering a company and then launching your website.
Then, you need to define the service.
Businesses that offer virtual-assets services to third parties are required to become Virtual Asset Service Providers (VASP) at the National Bank of Georgia under the guidelines laid out by PB Services.
The scope of the concept includes things such as virtual-asset exchange and transfer, trading-platform administration as well as cryptocurrency custody management. Importantly, according to the regulations provided the custody concept encompasses administration of a customer’s private keys and wallet.
The technical specifications of the crypto product is crucial to its status in terms of regulation.
A founder interested in obtaining a crypto license in Georgia should therefore map the proposed customer journey before preparing the application. What happens after a user deposit funds? Who controls the account? Assets can they be exchanged or transferred? Which person is authorized authorise transactions?
Clear answers help establish the exact nature of what the business will be doing.
Your business plan should describe the real-world business
VASP applications require more than a visually attractive pitch deck.
According to the information supplied, according to the information provided, National Bank requires a detailed plan of operation that includes financial projections for the minimum of three years. This includes the amount of revenue, expenses, and the growth forecast. The plan must also prove genuine intent to conduct business in Georgia.
It is important to address this issue as soon as possible.
A business model written to be used by investors addresses questions such as how quickly the company’s growth rate can be accelerated. The plan of business for regulation should also describe how the operation is to be run responsibly.
Companies seeking a vasp Georgia license must prepare to connect to the commercial model as well as the compliance model, instead of considering the two documents as distinct documents.
AML cannot be added to the End
PB Services has described the preparation process as a major component of which is the controls to stop financial crime and the financing of terrorists.
The warnings are specific to importing an AML policy from another country is not enough since Georgian requirements must be incorporated into a company’s framework.
It is also important to take into account the operational system. The business plan should be able to demonstrate that the business’s system can identify potentially suspicious and related transactions.
Practically, the compliance of a product must influence its design before it’s launched. First, establishing a platform and looking into how AML procedures fit later could lead to unnecessary changes and create delays.
Capital is contingent on the Services you choose
The need for regulatory capital is a further reason to define the business model earlier.
As per the thresholds set forth in the source material for exchange and transfer, including kiosks, they must have at minimum 150,000 GEL. Trading platform administration requires 350,000 GEL while other covered services need 250,000 GEL. The highest threshold applies for multiple services.
This is different from regular capital for investment or operating. Evidence that the required amount is actually funded should be included with the request, and the capital needs to be maintained during the entire operation.
The person who is aspiring to get a crypto-blockchain license in Georgia should consider the regulatory capital in his budgeting before the other aspects have been taken care of.
Registration isn’t the only aspect of the compliance process.
The compliance calendar does not end with approval. The requirements include continuous obligations pertaining to cybersecurity, risk management and technology resilience. They also cover the retention of records, independent review customers’ complaints, retention of records.
For example an independent auditor’s report regarding the risk-management system must be sought within 12 months from the time of registration. The rules state that companies must take complaints in written or oral form and review them within one month. They are also required to send statistics of complaints to the National Bank electronically each month.
These aspects affect the way serious applicants must be approached when seeking licensing.
Instead of thinking of an Georgian VASP application as a set of forms needed to receive permission consider it as the structure of an regulated business.
It is important that the corporate structure, technology, AML controls and regulatory capital, along with customer processes, are in sync.
Georgia offers opportunities to businesses in the field of fintech and crypto and the regulatory framework gives a clear path into the market. The best place to start is not by asking what speed a license is going to be granted.
It’s being able, specifically, to define what your crypto business plans to do and to show that your business will be doing so in accordance with the Georgian legal framework.
