INTRODUCTION

Rokhvadze & Partners, a legal firm, provides legal support services for VASPs (Virtual Asset Service Providers). Our goal is to establish a certain infrastructure during project launch. Legal support aimed at eliminating all risks from the moment of project launch, which companies may encounter, becomes an effective tool for planning and control of complex structured tasks. Blockchain technology contributes to the emergence of a large number of enterprises that independently attract financial resources, manage infrastructure, and create value for consumers in radically new ways.

To better understand the fundamentals of virtual assets and the terminological "framework" of the legal entity, it is necessary to reveal the essence of blockchain technology itself and a number of related definitions (token, crypto-asset, identifier, virtual asset, tokenized asset, etc.).

Blockchain is a technological solution in digital space, providing a modern way of accounting for digital data. Essentially, blockchain is an accounting system based on accounting objects in the form of tokens - entries in the digital data accounting system based on distributed ledger technology, representing an identifier of information that may be, but not exclusively, derived from the original asset. Let's examine the definitions determined by Georgian legislation.

Virtual asset - a digital expression of value that is interchangeable and non-unique, subject to transfer or trade in digital form, and used for investment and/or payment purposes. A virtual asset does not include digital representation of money, securities, or other financial instruments.

Convertible virtual asset - a virtual asset with an equivalent market value in national or foreign currency, another virtual asset, and/or financial instrument to which it can be exchanged.

Virtual asset service - exchange of a convertible virtual asset (including through a self-service kiosk) for national or foreign currency, another virtual asset, or financial instrument; transfer and/or storage/management of convertible virtual asset or tool necessary for its use, allowing for control over the virtual asset, management of a portfolio consisting of convertible virtual assets (except for collective portfolio management), and/or administration of a trading platform for convertible virtual assets and/or lending of such virtual assets.

Virtual asset service provider - an individual or entity providing virtual asset services on behalf of another person.

WHAT YOU NEED TO KNOW ABOUT THE REGULATION OF VIRTUAL ASSETS IN GEORGIA?

Legal status and functions of VASPs:Services related to virtual assets, due to their nature (high degree of anonymity, transaction speed, transaction tracking complexity, etc.) are associated with increased risks of money laundering and terrorist financing worldwide. To eliminate these risks and maintain the high reputation of the Georgian jurisdiction, the Regulator decided to create a legal basis for the regulation/supervision of virtual asset service providers, which will comply with the recommendations and fundamental principles of the Financial Action Task Force (FATF).

At the first stage, the legal framework defined by the law provides supervision of virtual asset service providers in the following directions:

Main functions of VASPs:The Financial Action Task Force (FATF) defines a VASP as a business that performs one or more of the following actions on behalf of its clients:

What you need to know about VASP regulation in Georgia: an overview.

¹Unless otherwise provided by Georgian legislation

PRIMARY REGISTRATION OF AN LLC:

The Georgian Law on Entrepreneurs provides for several types of legal entities, subjects of economic activity. As practice shows, for VASPs, the most suitable forms are either an LLC or a JSC. But before determining the legal form of the company, it is necessary to conduct a preliminary analysis, which will include:
1) Determining the legal structure of the VASP:
This action implies establishing the type of company structure in accordance with both the established AML standards and the company itself.
To determine the company's form, the legal firm Rokhvadze & Partners will be guided by the following criteria:

2) Formation of the company's equity capital.The main goal of forming the VASP's capital is to attract a sufficient volume of it to finance the acquisition of the necessary virtual assets, as well as to optimize its structure from the standpoint of ensuring the conditions for its subsequent efficient use in the crypto market. The initial stage of managing the company's capital formation is to determine the need for its required volume.
According to Georgian law, the capital of an economic entity can be formed from both internal (own) and external (borrowed) sources (including investments). According to Georgian law, equity capital can include funds placed on the personal bank account of the UBO², movable/immovable property owned by the UBO.
The legal firm Rokhvadze & Partners will provide full support for the process of forming the charter capital of the VASP:

²UBO (Ultimate Beneficial Owner) - a person who, in fact, owns the company and benefits from its activities.

Stage 1. Primary registration of an economic entity.

A comprehensive package of company registration services includes:

Terms: 5-7 days.

Stage 2. Opening a fiat account.

(assistance in remote registration through a corporate manager).

Our company will conduct a full analysis to select the appropriate payment solution that meets the VASP requirements.

We offer several solutions for asset diversification.

Stage 3. Registration and connection of additional gateways.

The Binance Broker Program is a brokerage program from the crypto market leader, Binance. Broker partners can fully focus on business development and receive a share of trading commissions using Binance's high liquidity and market depth.

How does working with Binance look like?
This integration is achieved by having users' funds stored on the Binance platform, and order execution is also carried out on the Binance platform, but visually it all takes place on the company's platform.

Advantages of Binance Integration:

Using Binance's trading tools and liquidity directly on your platform;
Offering your users expanded and unique capabilities;
Providing access to Binance crypto products, as well as meeting more complex client needs such as upgraded cryptocurrency trading services, order matching, account management, and API-based settlement systems.
The legal firm Rokhvadze & Partners offers full support in obtaining the status and integration capabilities with Binance.

OBTAINING A NATIONAL BANK LICENSE

As of January 1, 2023, amendments will come into force that relate to the National Bank's obligation to supervise virtual asset service providers.

The main requirements for applicants will be:

When providing services/goods in Georgia or to Georgian counterparties for more than 100,000 GEL in the accounting calendar year, the company is obliged to register as a VAT (18%) taxpayer to avoid fines. However, in the absence of providing services/goods in Georgia, the company is exempt from paying VAT altogether and does not submit VAT reports to the tax office.

According to Georgian tax legislation, the company is obliged to maintain reporting. The company is also required to keep all accounting documents for 4 years. The company must submit reports monthly no later than the 15th of the following reporting month.

Since January 1, 2010, an extract from the Register of Entrepreneurs and Non-Entrepreneurial (Non-Commercial) Legal Entities has the same force as a tax registration certificate. That is, the company's identification number and tax number are unified.

VASP Taxation:
The tax on the company's withdrawn capital with the general tax system is 20% = corporate tax 15% + dividend tax 5%.

All transactions with convertible virtual assets are exempt from VAT. Property tax is 1% - declared in March/April - paid in June. However, usually, the Tax Service indicates new declaration submission dates and tax payment dates each year.

Personal income tax is 20%. In Georgia, the company is obliged to pay this type of tax in case of payment to an individual (except for individual entrepreneurs).