The National Bank of Georgia has announced its intention to begin nationwide supervision of the digital currency industry in the last quarter of 2023.
Local news outlet InterPressNews reported that the banking regulator will up the ante for exchanges starting in September, requiring all operators to comply with new standards. Acting Governor of the NBG Archil Mestvirishvili confirmed that the central bank would float new anti-money laundering (AML) directives in the coming months.
Mestvirishivili explained that the incoming rules are designed to bring Georgia in compliance with Western-backed sanctions against Russia following its invasion of Ukraine. As a breakaway from the defunct Soviet Union, some analysts opine that sanctioned Russian entities may lean on Georgia to circumvent its economic sanctions.
Confirming his country’s stance in upholding the sanctions against Russia and Belarus, Mestvirishivili disclosed that the Georgian central bank had launched a new supervisory body. The new body is tasked with ensuring compliance with the sanctions with full-scale supervision over digital asset service providers expected to begin before the end of the year.
“We have created an additional department for monitoring sanctions. The enforcement of the sanctions is very important and the financial sector takes it very seriously,” Mestvirishivili said.
Georgia ranked as one of the friendliest jurisdictions for digital assets in the world, currently houses thousands of Russians fleeing Russia’s sanctions. Experts claim that the sanctions on their credit and debit cards have forced the hands of fleeing Russian citizens to rely on digital currencies to settle transactions.
Aside from increased supervision, Russian bank account holders will be unable to withdraw an excess of 20% from their savings account amid financial stability concerns.
Georgia’s digital currency ecosystem is preparing for wholesale changes starting with a draft bill designed to streamline local rules with the European Union’s regulations. Given the lack of robust regulations for the industry, the government has hinted at creating a new regime of laws for service providers.
An array of options for Russia
Russia’s central bank and Finance Ministry are increasing collaboration to explore new ways to circumvent existing sanctions for international settlements. Both agencies throw their weight behind a central bank digital currency (CBDC) with cross-border settlement capabilities.
Other options for Russia are via the adoption of stablecoins for merchants and using state-regulated digital currency exchanges. An earlier version for a national exchange platform was scrapped after falling out of favor with the Ministry of Finance in late May.
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