Legal regulation of cryptographic assets and taxation issues (კრიპტოგრაფიული აქტივების სამართლებრივი რეგულირებისა და საგადასახადო დაბეგვრის საკითხები)

Abstract

The development of digital technologies and complex cryptography started the formation of the digital segment of the economy – crypto business. Complex blockchain technology was developed by Satoshi Nakamoto, on the basis of which he created the first cryptographic currency – Bitcoin (Bitcoin BTC) in 2008. The idea that led the crypto-architect Satoshi Nakamoto to create the cryptocurrency – Bitcoin, was to transform the functioning of monetary systems, namely, to implement monetary transactions in a decentralized form, i.e. without intermediaries. The acquisition of cryptographic currency – "mining", implementation of cryptocurrency transactions and their processing in decentralized systems introduced a new class of assets into circulation, the so-called crypto assets, the first of which is the cryptocurrency – Bitcoin. At the present stage, the issues of legal regulation of crypto assets are sufficiently weak and vague, which leads to the occurrence of risks. Avoiding expected threats and risks requires the implementation of important measures, because anonymous and unregulated exchange of crypto-assets, as well as the absence of control mechanisms, can create threats of obtaining hidden and illegal income and committing other financial crimes in the future. The purpose of the study is the study and analysis of the international practice of legal regulation of cryptographic assets (cryptocurrency), as well as legal regulation and taxation issues related to cryptocurrency in Georgia. In Georgia, there is also a favorable environment for the development of crypto-business, which is due to the following circumstances, in particular, in accordance with the law "On free industrial zones", companies operating in specified zones are exempt from profit, property and value added tax. Liberal tax policy allows large cryptocurrency producers to work in free industrial zones. Crypto business is profitable even in highmountain regions of the country. Digital currency transactions are generally quite energy-intensive, in particular, one transaction consumes 215 kWh of electricity (Sichinava D. & Maghradze M. 2018). The population of the high-mountain region is exempt from electricity tax or enjoys significant benefits. Accordingly, the situation in the regions led to a violent and somewhat uncontrolled development of cryptocurrency mining. It is also important to consider that the extraction of minerals has a negative impact on the environment, as in the process a large amount of CO² is released into nature. In particular, in the process of mining one Bitcoin, the mining farm emits from 8,000 to 13,000 kg of CO² into the environment and during one hour of operation – from 24,000 to 40,000 kg of CO², which should be subject to proper regulation and control. In the article, the issues of legal regulation of cryptographic assets (kryptovalyuta) at the international level and in Georgia are considered. Due to the lack of practical data, we could not conduct an in-depth analysis of real events and circumstances, and the conclusions presented in the study are mainly based on the analysis of literary sources. The article also considers the state of taxation of cryptocurrency operations (cryptoactives) in Georgia.