It’s not precise enough to describe a legal application as “We’re opening our crypto platform”.
Customers can exchange cryptocurrency in exchange to fiat? Will the platform be able to transfer virtual assets? The company will have control over the wallets of clients as well as private keys? Do they manage a lending platform for digital assets that issues tokens or overseeing a trading system?
These differences are important when seeking a crypto license in Georgia due to the services that a business plans to offer will impact its preparation for regulatory compliance, documentation, controls, as well as capital requirements.
Georgia has a legal market for virtual assets that is appealing to fintech companies. However, entering the market is more work than simply registering your company and launching a website.
The definition of the scope of service
Based on the model described by PB Services, businesses providing covered virtual-asset services for third parties need to be registered as Virtual Asset Service Providers with National Bank of Georgia.
Within the scope are the activities of virtual asset exchange and transfer as well as managing trading platforms and custody or management of cryptocurrency. According to the information provided by the regulator, the custody concept includes the administration of a client’s private keys and wallet.
The technical structure of the product in question is important to its place as a result of regulations.
Before submitting a license application, a founder who is interested in obtaining an e-currency license in Georgia must outline the customer’s journey. What happens after a customer deposits funds? Who is the person who controls the account? Can assets be exchanged for or transferred? Who is authorized to authorize transactions?
Clare answers can help define what the company will actually be doing.
Your Business Plan Has to describe a real business
A VASP application also requires more than an attractive pitch deck.
The National Bank will expect a detailed business proposal that includes financial projections over minimum three years. It should include revenues, expenses and growth expectations. The plan must also reflect a genuine intention to operate in Georgia.
This is a problem that needs to be addressed as soon as possible.
A business plan designed to be used by investors addresses questions such as how quickly the company can grow. The business plan for an operation that is regulated must include information on how the operation will be conducted safely.
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
PB Services has described the preparation process as a key part of which are the controls against money laundering and terrorist financing.
The document specifically warns against simply importing a policy regarding AML from another jurisdiction because Georgian AML regulations must be integrated into the framework of a business.
The operational systems play a role in the same way. The business plan must prove that the company’s system can detect potential suspicious transactions as well as related transactions.
Practically, the compliance of a product has to influence the development of the product before it can be released. The process of creating a platform before considering how AML procedures will fit afterward could lead to unnecessary changes and cause delays.
The services you select can Impact Your Capital
Regulatory capital is another reason to establish the business model before.
As per the thresholds set out in the source material, exchange and transfer activities such as kiosks, need 150,000 GEL. Trading platform administration needs 350,000 GEL while other covered services need 250,000 GEL. The highest threshold is required when multiple services are provided.
This is different from regular capital for investment or operating. Documentation that proves the required amount has actually been funded must be included with the application and the capital must be kept in place throughout the operation.
A business owner who intends to apply for a crypto blockchain license in Georgia needs to consider regulatory capital at the time of financial planning but not once the rest of the application has been completed.
Registration is not the end of compliance work
The calendar of compliance doesn’t end with approval. It is a requirement that includes ongoing obligations related to risk management, cybersecurity and technology resilience. They also include records retention, independent reviews customers’ complaints, records retention.
For instance, an independent auditor’s opinion regarding the risk-management framework has to be obtained within 12 months from the time of registration. The rules on handling complaints require companies to accept complaints in written, oral, or electronic form, analyze them within a maximum of a month, and provide information about complaints electronically to the National Bank each month.
These aspects can alter the way in which a serious applicant approaches licensing.
Imagine the Georgian VASP Application as the design of an legally regulated business.
The structure of the business, the service model, technology, AML controls, regulatory capital, risk procedures, and customer processes have to connect.
Georgia is still a great location for crypto and fintech companies. The regulatory framework it has provides an established path to market. The best place to start isn’t determining how quickly it is possible to obtain a license.
It’s being able to explain clearly what your cryptocurrency business plans to perform and showing that the business is ready to conduct it within the Georgian regulatory framework.