Custody in the Language of the Law — What Virtual Asset Service Means
The Organic Law of Georgia on the National Bank of Georgia defines a virtual asset as a digital expression of value that is interchangeable and not unique, is the subject of digital transfer or trading and is used for investment and/or payment purposes. A convertible virtual asset is a virtual asset that has an equivalent market value in national or foreign currency, in another virtual asset or in a financial instrument. The whole category system for services is built around convertible assets, and custody is one of its central categories.
The law recognises as virtual asset service: the exchange of convertible virtual assets (including through self-service kiosks) into currency, other assets or instruments; transfer; and the storage/administration of a convertible virtual asset or of the instruments required to use it, which give control over the asset; as well as portfolio management (other than collective portfolio management), administration of a trading platform, lending of the asset and services around an initial offering. For a custody business model the decisive formula is “storage/administration that gives control over the virtual asset” — it determines that managing private keys and administering other control instruments fall under the same regime. A VASP is a person that provides such services for the benefit of another person.
Registration with the National Bank — the Entry Gate
Article 52-5 of the law sets a strict entry rule: a virtual asset service provider must register with the National Bank of Georgia and satisfy its requirements. The rules for registration, deregistration and regulation are established by a normative act of the National Bank. It is impermissible to provide the service by a person that is not a provider registered with the National Bank or a financial sector representative whose own sectoral legislation grants it that authority. When planning a custody service, this means the choice of structure — a standalone company or a member of an existing group — must begin with an analysis of the registration requirements.
The specialisation norm matters no less: a provider is prohibited from carrying out any activity other than the provision of virtual asset services, the auxiliary activity necessary for them and the exchange of its own virtual asset. A custodian concurrently running another business breaches this boundary — in structuring, the restriction must be planned at group level.