Technology advancement in the Post Soviet space has been developing at a rapid pace as local job markets started to fail in their accommodation of surplus humanities experts. Because of this, young entrepreneurs and already successful businessmen took advantage of the rapidly developing blockchain technology and tried to make at least some kind of profit off of it while it was still possible.
Many were able to succeed as we’ve seen hundreds of ICOs come out of this region, but very few managed to be as successful as Georgia was in implementing cryptocurrency mining on a level that’s already present in the country.
Georgia is a very small nation in the Caucasus region and managed to become independent from the Soviet Union in 1991. Ever since independence, the country has been growing its economy and trying to find sectors where it excels at.
It’s currently the tourism sector, but large crypto mining farms are quickly catching up in terms of profitability.
There are currently around two dozen brands that hold significant facilities for mining cryptos like Bitcoin, Ethereum, Litecoin, and even Bitcoin Cash. However, the market share is heavily divided as only one company holds around 80% of the country’s overall mining output.
That company is BitFury, which isn’t necessarily a Georgian company. It was founded in the Netherlands and moved to Georgia due to a business partnership with A Georgian investor. Ever since then, the company has generated billions due to government subsidies on the industry, as well as very cheap electricity and labor costs.
At this point, Georgia is in second place for the most mining output in all of the world. Should China completely ban all crypto mining operations on its territory, Georgia will become the largest of them all.
Crypto presence in Georgia
Although the country is so big in mining cryptocurrencies, they’re not nearly as big in trading the assets.
it’s similar to how Iran tackles it, where they allow mining, but don’t allow trading. In Georgia’s case, both are legally accessible, but not as popular for the general public.
The only crypto startups that have occurred in the country are quick Georgian loans companies through cryptocurrencies and a recent crypto exchange which targets to educate the population about the potential of crypto.
Other than that, there are maybe a few dozen people who are actively involved in trading cryptos for a living.
Why has the government not intervened?
Georgia is a very weird case in the crypto industry as the government has not really touched upon implementing the technology in its system, even though it voiced support numerous times.
There’s no real crypto mining nor crypto trading tax in the country, meaning that large scale miners and traders don’t have to worry about additional costs. Crypto transactions are not affected by VAT payments. Pretty much the only cost that mining companies have is revenue tax, which is the case in every country all over the world.
But even there, BitFury is able to utilize some benefits. The reason is the Georgian investor that introduced them to the country in the first place.
The investor is quite an interesting figure, by the name of Bidzina Ivanishvili, who used to be the Prime Minister of Georgia and the founder of the currently ruling political party. Therefore, he had quite a lot of influence over local politics to ensure absolute profitability of BitFury with a few political shenanigans.
What does the future look like?
The implementation of cryptocurrencies into the national budget seems to be a perfect alternative for the Georgian government. Why? Because of political pressure from the Russian Federation.
You see, there’s a lot of political beef between the two nations. They recently fought a war in 2008, which Georgia promptly lost. This is no surprise as the Russian army is larger than the whole population of Georgia.
Because of this, political relations have been quite tense, in fact, there are no official relations at all. They were severed the moment the war started.
Despite this, commerce and trading have continued at an increased level. Georgians rely on the Russian market to export most of their goods, and Russians rely on Georgia for a cheap travel destination.
Overall, quite a lot of funds are funneled into Georgia from Russia. Because of this, many locals believe that they’re slowly starting to become dependant on their enemy, which was confirmed in June 2019, when Russia banned flights to Georgia due to yet another political controversy.
This caused the local currency exchange rate to get out of control and is still depreciating right now.
The Georgian economy could use cryptocurrencies as an alternative medium of exchange within the country or with foreign trade partners, thus making them immune to further Russian sanctions.
Will Georgia be the next Malta?
Malta has already become a cryptocurrency hub due to no taxation of local traders and overall very crypto-friendly environment.
The thing is that Georgia is exactly the same, but there’s one very big difference. Malta is an EU nation, and Georgia is not. Furthermore, employment in Malta tends to pay much more than Georgia, which allows crypto traders to still have an alternative if the month is slow.
Should Georgia manage to join the European Nation and still retain its benefits for crypto traders, it’s very likely to attract thousands upon thousands of foreign traders and allow them to spend their profits on the local market.
Local jobs may not pay so well, but the country is much cheaper than any other EU nation one can think of.
Countries like Georgia are the most likely crypto hubs of the future, and definitely deserve the attention of large crypto exchanges that are trying to find optimal locations for an office.