Georgia Will Have a Digital Currency Until 2022

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Former Georgian Finance Minister Nodar Khadouri signed a bill not so long ago that said that all digital currency in the country will be taxed. This bill has been introduced in 2019, so with it, the Georgian government showed that they fully support the currency code, as well as the Chinese blockchain.

This is evident since a few years ago, when the Georgian government decided to archive its national data with Chinese blockchain. In addition to all this, there are crypto ATMs in the major cities of Georgia: Tbilisi, Batumi and Kutaisi, so this further shows how much cryptocurrencies are traded in the country. So, it comes as no surprise that the country is looking to introduce its own digital currency in 2022. Let’s dive deeper into that.

Georgian Digital Currency Will be Live in 2022

In the big news just recently, the Vice governor of the NBG (National Bank of Georgia) Papuna Lezhava said that they plan to test their digital currency as soon as next year. According to their research, 85% of the central banks worldwide are already exploring the idea of issuing their own digital currencies.

Lezhava states that what is digital currency cannot be replaced by any other payment system in the world, and he notes that some of the countries in the world, like China and the Bahamas, are already in the implementation phase of their own digital currency. According to him, they see this as a big opportunity to be at the forefront of this new trend.

The CBDC not a Cryptocurrency

The CBDC (Central Bank Digital Currency) will not be a cryptocurrency, but it will be the next step of the evolution of cash, says Lezhava. The digital Georgian lari, as it will be called, will eventually be created and based upon the same technology that powers the blockchain, but the lari will not be mined, and it will not be subject to market speculation, which will be the main differences from the cryptocurrencies.
Lezhava has also emphasized that no other authority and body will have the permission to issue the digital currency, only the NBG will have that permission. Next year’s introduction and trial period will only be the beginning, but the NBG is confident that the digital lari will be able to compete with the other cryptocurrencies in many aspects, despite the key differences they will both have.
The initial stage of the digital lari’s introduction will only cover the retail sector, but over time the NBG expects it to expand to other sectors as well until it eventually replaces the standard payment systems, so no one will have to worry about comparing the Georgia lari to dollar, or to any other currency in the world. The NBG sees this as an essential part of their future economic plan, hence the rush to introduce the digital currency as early as next year.

Georgian Digital Currency as an Idea

All digital currencies are based on blockchain technology, which is known for reducing costs and complexities of all financial transactions, while also adding transparency to those transactions. The implications of this blockchain technology are far-reaching, and they are present in every sector.

These digital currencies cannot be counterfeited, and they provide anonymity, unlike cred cards, as an example. So, the officials behind the project that will introduce digital currency in Georgia believe that the digital lari will help to improve the overall efficiency of the current payment system in the country, and it will promote financial inclusion in the country.

The digital lari is not the next Bitcoin, but it has many similarities to it, especially when you consider the speed of the transactions compared to the traditional payment methods. Transactions with the digital lari will not require any internet connection, and Lezhava notes that the main advantage of the Georgian digital lari is that it will be compatible with other technologies, something that is not possible with the current payment system.

The NBG called fintech companies, financial institutions and all interested tech companies to help and support their idea of creating the digital lari, so this is further evidence that they are quite serious about this idea, and this will not be just the next crypto coin, it will be much more than that. These companies were invited to join the public-private partnership which will help smoothen the introduction of the digital lari.

Georgia is not alone in developing a digital currency, the US, the European Central Bank, and the Bank of Russia are also working on introducing their digital currency, but China seems way ahead of them, as they are on a trial basis with the digital yuan.

International Monetary Fund Director Believes in Digital Currency

The IMF cryptocurrency regulation states clearly that digital currencies supported by central banks are the most reliable and trustworthy form of digital money. Kristalina Georgieva, who is the MD of IMF states this and adds that to think of any cryptocurrency as a central bank currency is very difficult.

According to the stats of the IMF, 110 countries are exploring the possibility of introducing their own central bank digital currency. Georgieva said that the key challenge for all monetary authorities in the world is to guarantee the interoperability of these digital currencies.

Georgieva shares one concern though – whether these digital currencies, which would be backed by states, can be means of exchange that the general public will trust. Other concerns that need to be addressed is whether these CBDCs can guarantee and contribute towards the economic stability of the country, and how it would fit with some of the regulations imposed by organizations such as the Bank for International Settlements.

The innovation hub within the BIS leads several projects at once which have the purpose of testing the use of digital currencies issued by the states, and how they can be used in international transactions. There are joint trials by China, Hong Kong, Thailand and UAE, together with a CBDC test carried out by the Swiss National Bank and the Banque de France.

Kristalina Georgieva also adds that she is very impressed by the cooperation between international financial organizations and national monetary authorities regarding state digital currencies, and how much all those institutions are engaged in making sure that this will help the economy function better, rather than being a risk in this fast-moving digitalization world.

As mentioned above, the head of the IMF strongly disagrees with claims that cryptocurrencies can be viewed as money. Digital currencies issued by the central banks are the most reliable form of digital money. Cryptocurrencies are not stable and they can rise and fall very sharply, which goes against every definition of money throughout history.

Kristalina Georgieva finishes her address at the Italian academic event by stating that the world cannot afford itself another crisis such as the one with Greece after the global financial crisis, but the Old Continent is now better prepared to deal with such an issue should it arrive.

Governments need to make their next steps very carefully, and it can be concluded that the introduction of a digital currency by states such as Georgia is a welcome sight for the IMF, and any approved IMF coin is likely to have long-lasting effects on the countries’ economies.

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