IMF wants Georgia to reform its accounting of crypto industry

Georgia is currently ranked fourth in digital currency production from crypto mining, and they are home to Bitfury, one of the biggest Bitcoin mining companies in the world. ​However, despite being among the largest producers of cryptocurrencies, Georgia’s income from cryptocurrency-related activities such as mining and trading are not reflected in their trade balance reports.

To address this, the International Monetary Fund (IMF) has reportedly suggested that Georgia include the income from cryptocurrency-related activities in their annual foreign trade balance reports since a significant percentage of their economy consists of crypto mining and trading.

​The IMF recommends Georgia to be more transparent when accounting for crypto mining. Georgia’s income from cryptocurrency production despite being among the highest in the world is still unknown. The IMF had already met with large crypto mining companies and advised them to take records of their sales of cryptocurrencies to foreign parties. Since their locally-mined cryptocurrencies are sold to foreign entities, this activity can be considered a form of export, and thus must be accounted for to uphold transparency further.

The organization is currently working closely with Georgia on improving statistics and methodologies for calculating the trade balance, as well as discussing the introduction of accounting in the activity of crypto mining. These new insights will aid Georgia in accounting for their crypto-related income to address the IMF’s request for transparency.

 ​Because cryptocurrency mining comprises a fair portion of Georgia’s economy, the IMF believes that the country’s government must acknowledge the industry. 

IMF Deputy Division Chief Mercedes Vera-Martin stated that the sale of cryptocurrency in large amounts to foreign buyers must be accounted for in the country’s international trade balance. Similar to their exportation of copper ore, Georgia must recognize the income generated by their exported digital currencies and record this income so that it may be reflected in their foreign trade balance.

​​The National Bank of Georgia reported that the total number of digital wallets registered in the country in the last year amounted to 5,300, which had an equivalent of $708,000. As a measure to further gauge the significance of cryptocurrency in the country, the IMF suggested that The National Bank of Georgia determine the number of digital wallets and its corresponding monetary equivalent of non-residents in Georgia. Additionally, the IMF created a questionnaire for the country’s government that aims to determine the amount of Bitcoin produced and sold to foreign buyers.

Cryptocurrency mining requires large amounts of power. In a BBC podcast, David Chapashvili of Green Energy said crypto mining consumes more than 10% of the total electricity produced by the country, as Bitfury alone already consumes about 4% of the country’s power. The country’s cheap hydro-electricity has attracted many crypto miners. As a result of the large-scale mining operations, there have been instances of power outages that have affected many of the country’s residents.

​The significance of determining the country’s income from cryptocurrency export lies in its national accounts statistics. Georgia imports equipment such as application-specific integrated circuit devices for mining, which is reflected in their trade balance, while their export of digital currencies is left out. The country’s foreign trade balance reports become inaccurate, as imports are recorded and accounted for, while exports are not, which ultimately led the IMF to suggest its recommendations to the country.