Cryptocurrency Mining & the Future of Cryptocurrencies in Georgia
Cryptocurrencies are becoming increasingly popular in the fintech world, with lots of people looking to make bitcoin investments. Cryptocurrency, a digital alternative to paying in traditional currency, operates using special technology, blockchain technology, and bases itself on the concept of a decentralised network. It has become popular in Georgia, the world’s third biggest cryptocurrency mining country, although the country’s fiat currency, the Lari, is still the main currency and cryptocurrency is not yet legal tender in the country.
How did it all begin?
US-based cryptocurrencies may have had an influence. Like many other countries, Georgia likes to produce wine, but now in some of the country’s wine regions, you’ll now find huge cryptocurrency mining centers, like that of US-based tech company Bitfury. Despite the Georgian government’s advising the public to tread carefully with cryptocurrency, the nation appears to be embracing virtual currency. Not everyone in the political sphere is as cautious as the nation’s government, however, and one political party has even used cryptocurrency mining to raise funds for its campaign.
Georgian cryptocurrency laws
The laws surrounding cryptocurrency are curiously cautious, almost as if the powers that recognise the potential of cryptocurrency also feel slightly frightened by it too. Although citizens may not use cryptocurrency to pay for goods or exchange cryptocurrency for flat currency (government-backed currency), transactions will not be subject to value-added tax (VAT), a rule which applies to companies and to private individuals trading bitcoin. This is in line with rules that several other European countries are also following.
None of this means that cryptocurrency mining companies are off the VAT hook, however. They’ll still have to pay VAT. The only way around this is to move abroad and operate from there. If companies decide to do this, it could hurt the Georgian government’s coffers, but the energy infrastructure may heave a sigh of relief, due to the huge amount of energy cryptocurrency mining can require.
How are Georgians using cryptocurrency?
Since cryptocurrency isn’t legal tender in Georgia, it’s all about mining for bitcoin and other cryptocurrencies, something which organizations such as the World Bank are recommending that Georgia pursue with gusto. They believe Georgia can make the most of the technology to make services in the country more innovative. According to the World Bank, surveys have indicated that 5% of households in Georgia engage in cryptocurrency mining operations or activities.
The widespread practice of cryptocurrency mining is largely due to favorable conditions for it, including the VAT exemption and the low price of energy. As it becomes more and more difficult to mine for cryptocurrency and requires increasingly powerful technology, miners’ energy costs can become more significant.
How does the future look?
The new tax rules on cryptocurrency could see mining companies move their operations out of Georgia and register abroad to continue enjoying the tax incentives around cryptocurrency. Meanwhile, several other European countries are still experimenting with blockchain technology, whereas Georgia has fast become one of the cryptocurrency’s leading lights. These countries are seeking to streamline public services and digitize them. The aim would be to make them more transparent, secure and safer.
Georgia’s prowess and appetite for cryptocurrency mining has surprised some nations and, given the favorable conditions for the activity, more people may start to get on board with cryptocurrency. If the Georgian government starts to embrace blockchain technology as suggested by the World Bank report, there’s no reason why citizens and companies won’t follow.