“We’re launching a crypto platform” isn’t a precise enough description for a regulatory application.
Can customers exchange crypto for fiat currency? The platform will allow the transfer of virtual assets? The company will be in control of wallets for clients or keys? Will it manage a trading platform, or loan against digital assets?
Those differences matter when pursuing a crypto license in Georgia because the services a company intends to provide affect its regulatory preparation, documentation, controls, and capital requirements.
Georgia is a great place to start fintech businesses, however getting into its highly-regulated virtual asset market requires more than registering a business and building a website.
Defining the term “service”
Businesses offering virtual asset services to third-party clients under the framework described in PB Services must register with the National Bank of Georgia as Virtual Asset Service Providers.
The scope encompasses activities such as virtual-asset exchange and transfer, platform administration for trading, and cryptocurrency custody or management. It is important to note that the provided regulation states that the custody concept extends to the management of a user’s private key or wallet.
This makes the design of an crypto-product important to its regulation status.
A business owner who would like to get the crypto license in Georgia should map out the proposed customer journey before creating the application. What happens when a consumer deposits money? Who manages the wallet? Can assets be exchanged, or transferred? Who is the entity that has the authority to approve a transaction?
The answers are clear and help determine the exact nature of what the business will be doing.
The business plan you create must outline a real business
VASP applications need more than just an attractive pitch deck.
The National Bank will expect a complete business plan that contains financial projections over at least three years. This must include income, expenses and growth expectations. The plan must also demonstrate an actual intention to conduct business within Georgia.
This is a requirement that needs to be considered early.
A business model written to be used by investors addresses questions about how quickly the company’s growth rate can be accelerated. The business plan for the regulatory process must include details about how the operation will be conducted in a responsible manner.
Companies that are seeking vasp Georgia license must be prepared to link the commercial model with the compliance model, instead of considering the two documents as separate documents.
AML is not possible to add at the very end
PB Services has described the procedure of preparation as a significant part of which are the controls against terrorist financing and money laundering.
The document specifically states that just the import of an AML policy from another state is not sufficient since Georgian regulations must be incorporated into the company’s framework.
It is also important to take into account the operational system. The business plan should demonstrate that the systems of the firm can identify related or potentially suspicious transactions.
Practically, the compliance of a product has to influence its development before it is released. When you build a platform, and then deciding on the way AML will work it can lead to unnecessary delays and redesign.
Capital is Dependent on the services you select
Establishing the business’s model in the earliest possible time is essential for a variety of reasons, such as regulatory capital.
According to the guidelines in the source material for transfers and exchange, which includes kiosks must be at the minimum of 150,000 GEL. Administration of the trading platform needs 350,000 GEL and other covered services require 250,000 GEL. If multiple services are offered the threshold that is the most applicable determines.
It’s not the same as operating capital that is used for normal purposes. The evidence that the amount has actually been funded must be submitted with the application and the capital needs to be kept in place throughout the operation.
The founder that wants to get a crypto-blockchain license in Georgia should therefore take into consideration the capital required by Georgia’s regulatory authorities in his budgeting process prior to the time that the rest is completed.
Registration Don’t End the Compliance Work
Approval isn’t the time where the compliance calendar ceases to exist. The required requirements outline continuing obligations in cybersecurity and risk management security, technology resilience and risk of fraud as well as records retention, independent review and complaints from customers.
A framework for risk management such as a risk management framework, for instance, will require an opinion by an independent auditor within one months from the date of registration. As per the regulations, businesses must accept complaints either written or verbally and then review them within a month. They also have to provide a report of complaints to the National Bank electronically each month.
These factors can affect the way an experienced license applicant approaches licensing.
Think of the Georgian VASP as a style for a business instead of a collection of forms to fill out.
It is vital that the organization’s structure and technology, AML controls and regulatory capital, in addition to customer processes, are all in perfect harmony.
Georgia offers opportunities to Fintech and crypto companies, and the regulatory framework provides an easy way to enter the market. The best place to start isn’t to ask how fast a license can be obtained.
You should be able to clearly describe what your business’s crypto-related activities will be and show that you’re ready to comply with Georgia’s regulations.