The government of Georgia has approved an updated legal framework for the financial sector that introduces more comprehensive regulations for digital assets. The draft laws, prepared by the Ministry of Economy and Sustainable Development, have already been sent to the Georgian Parliament for approval in its autumn session.
Speaking to local news outlet Business Media, Minister of Economy Levan Davitashvili stated that the legislative package will introduce three important European Union directives to Georgia to strengthen its financial sector. These include the EU Tax Services Directive (PSD2), Capital Requirements Directive (CRD), and Directive on Virtual Asset Services Providers (VASP).
He highlighted the directive on VASP, noting that it will grant legal status to digital asset trading entities and define their rights and obligations. The order will also entail written requirements for the entities to follow in preventing money laundering and combating the financing of terrorism.
“[VASP-directive] is particularly important for the formation of a legal environment for crypto-services and crypto-exchange organizations in Georgia,” he said.
Davitashvili added that the passage of the revised law is one of the most crucial steps toward the sustainable regulation of the digital asset industry in Georgia. The other directives will also boost the fintech sector.
Georgia looking to attract digital asset firms with regulatory clarity
The new legal package is not the only step the four-million Caucasus region country is taking to fulfill its hope of becoming a digital assets hub which it spelled out in a five-year development strategy from 2020-2025.
In April, the National Bank of Georgia announced that it was close to introducing new Financial Action Task Force (FATF) compliant digital asset regulations, which it had been working on in partnership with the International Monetary Fund (IMF).
The incoming regulatory clarity has caught the attention of several digital asset firms. Several of them, including Binance, FTX, and Ripple, are looking to set up regional headquarters in the country. Georgian Prime Minister Irakli Gharibashvili is reported to have met with FTX’s Sam Bankman-Fried to discuss the exchange’s plans.
Meanwhile, Georgia has not extended the same invitation to digital asset block reward mining. Georgia has discouraged citizens from engaging in the energy-consuming activity, with the country’s northwestern region of Svaneti making its residents swear a holy oath to not engage in block reward mining.
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