In March of this year, the Central Bank of the Republic of Georgia introduced new regulations regarding stablecoins (crypto assets designed to maintain price stability). These regulations require that stablecoins be backed by reserves, that issuers submit documentation, and that they undergo verification through external audits.Against this backdrop, it has been revealed that Tether, the world’s largest stablecoin issuer, is planning to issue “GELT,” a stablecoin pegged to Georgia’s national currency, the lari. This move suggests the potential for stablecoins to be integrated into a nation’s financial system.The partnership between the Georgian government and Tether goes beyond mere technical cooperation; it presents a new model for private companies to issue digital currencies within a strict regulatory environment led by the central bank. In particular, the requirements for reserve transparency and mandatory external audits are crucial for enhancing the credibility of stablecoins.This plan holds the potential to strengthen the role of stablecoins not only as speculative assets but also as a means of payment within the real economy. It is also likely to spark debate regarding the appropriate stance that regulatory authorities in various countries should take toward stablecoins.For working professionals in Japan interested in crypto assets, this case study from Georgia is expected to provide important insights for gauging future domestic regulations and trends in digital currencies.
What Are the Central Bank of Georgia’s New Stablecoin Regulations?
The Central Bank of the Republic of Georgia announced new regulations regarding stablecoins in March of this year. These regulations aim to ensure the sound issuance and operation of stablecoins.
Specifically, detailed provisions have been established regarding the reserves for issued stablecoins (the assets that back the issued currency or assets). This ensures that the value of stablecoins is reliably maintained by the underlying assets.
In addition, stablecoin issuers are required to submit strict documentation to ensure transparency regarding their financial condition and business plans.
Furthermore, external audits (verification of financial status and other matters by an independent third party) have been made mandatory. This establishes a system for objectively verifying the status of the reserve assets and the issuer’s operations.
These regulations aim to enhance the reliability of stablecoins and strengthen user protection. This move aligns with international regulatory trends.
Partnership Between Tether and the Georgian Government
Amid this regulatory environment, Tether, the world’s largest stablecoin issuer, has partnered with the Georgian government to plan the issuance of a new stablecoin called “GELT.”
GELT is a stablecoin pegged to the lari, Georgia’s legal tender. By being backed by the local currency, it is expected to maintain price stability.
Tether will provide the technology and expertise it has cultivated through the issuance of USDT and other stablecoins. This aims to ensure the stable operation of GELT.
Through this partnership, the Georgian government aims to accelerate its transition to a digital economy. This is seen as part of its efforts to promote the digitization of the financial sector.
This initiative is drawing attention as a model in which private companies issue digital currencies under strict rules established by the central bank. Collaboration between public institutions and private companies may open up new possibilities for digital currencies.
The Significance of “GELT,” a Lari-Pegged Stablecoin
Local currency-pegged stablecoins like GELT have several important implications. First, they have the potential to improve the efficiency of domestic payments.
Digitized Lari enables fast and low-cost remittances and payments. The benefits are likely to be particularly significant for cross-border remittances.
It may also contribute to promoting financial inclusion (a state in which everyone has access to financial services). Even people without bank accounts will be able to use digital currency via their smartphones.
Furthermore, they are expected to serve as a means of payment for international trade and investment. This could also promote the international use of the Lari.
However, the development of technical infrastructure and user education are essential for its widespread adoption. Careful management and a phased rollout are required.
International Trends in Stablecoin Regulation
Georgia’s new regulations and its partnership with Tether symbolize the global trend toward stricter regulation of stablecoins. This is because concerns regarding the stability and transparency of stablecoins are growing worldwide.
Major countries are moving to regulate stablecoins in the same manner as bank deposits and electronic money, taking into account their impact on the financial system.
For example, in the European Union (EU), the MiCA (Markets in Crypto-Assets Regulation) has been introduced, establishing strict requirements for stablecoin issuers. The regulation mandates the management and auditing of reserves.
In the United States as well, legislation regarding stablecoins is being developed. The primary objectives are to ensure consumer protection and financial stability.
The case of Georgia aligns with this international trend toward stricter regulation. It indicates that regulators are beginning to view stablecoins as part of the financial system.
Implications for Japanese Readers
The case of Georgia holds important implications for Japan’s crypto asset market and payment systems. In Japan, too, there is active debate regarding the regulation of stablecoins.
In Japan, the amended Payment Services Act came into effect in June 2023, legally classifying stablecoins as “electronic payment instruments.” Issuers are expected to include banks, trust companies, and money transfer operators.
A model like Georgia’s—where the central bank establishes clear regulations and private companies issue stablecoins within that framework—may serve as a useful reference for Japan.
In particular, requirements for reserve backing and mandatory external audits are points that Japanese regulators also prioritize. These can be considered essential elements for ensuring user trust.
Going forward, there is a possibility that specific cases of issuing fiat-pegged stablecoins will increase in Japan as well. When that happens, there will be much to learn from Georgia’s experience.
We need to closely monitor these international developments and deeply consider the future of digital currencies in Japan. It is important to keep an eye on future trends from a cautious perspective.
[Source: Original Article]
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