Georgia – a cryptocurrency hub that the world is yet to discover
By Veronika Malinboym
Monday, December 28
Earlier this week, the police uncovered a large amount of electricity theft from the auxiliary space of hotel Banguriani in the region of Svaneti, central Mestia. The theft is linked back to cryptocurrency machines that are consuming large amounts of electricity, which were valued at volumes similar to those of the 4-5 villages. But when did the remote regions of Georgia become the heart of cryptocurrency mining, and what makes this country a favorable destination for the crypto industry?
When most foreigners think about Georgia, cryptocurrency is hardly the first thing that comes to mind. Instead, people tend to think about cultural heritage, unique customs, traditions, cuisine, and winery. However, in 2017, this country with approximately 4 million citizens found itself ranking second in the world in terms of cryptocurrency mining – behind only China.
As the cryptocurrency craze continues its victorious march across the world and due to the country’s cheap hydropower and low regulation of electricity consumption, Georgia continues to attract large crypto mining corporations that base many of their centers across its territory. The catch for tech companies, such as the US Bitfury is obvious, but what is in it for Georgia and its citizens?
It is not clear whether the Georgian authorities wish to embrace this technological advancement or are frightened by it. Georgians still cannot use crypto to pay for goods and services or exchange it for the 'real', fiat currency, the transactions made with it are not subject to the value-added tax (VAT) – and this rule implies to both the companies and the individuals that choose to trade cryptocurrency. Of course, this does not mean that the companies that mine crypto do not have to pay VAT altogether, but the costs of operating in the country are still significantly lower for them, as opposed to elsewhere in the world. Moreover, it seems like Georgia is not only opposed to the 'new trend' of the large techs outsourcing their operations but encourages it. The World Bank recommended that the country explores this tech market further to increase the quality of fintech services.
However, as the younger population of Georgia is welcoming the cryptocurrency’s entrance to the country, not everyone shares their enthusiasm. Some experts believe that crypto mining is doing close to nill for the country’s economic development as this sector is not creating any jobs, and the profits leave the country to go to the larger, Western markets. Moreover, the electricity consumption that the industry requires puts a certain strain on Georgia’s energy sector.
It is not yet clear whether the Georgian authorities will be able to use the crypto’s sudden appearance to everyone’s advantage. Perhaps, one way to do that is to invest in domestic fintech, as well as scientific and technological entrepreneurship.