The FINANCIAL -- Two years have passed since former Prime-Minister of Georgia, billionaire Bidzina Ivanishvili, made the announcement about multi-million investments in BitFury’s data centres which now process Bitcoin transactions. Despite doors being closed off to the wider public, many Georgians were encouraged by Ivanishvili’s digital business plan and started investment in small cryptocurrency minings.
Meanwhile, others have used the opportunity offered by Liberty Bank’s operated eMoney company to trade with cryptocurrencies. However, rules not to communicate with the public remain unchanged. Last week The FINANCIAL was asking financial institutions, CEOs and local miners about their plans and investments in cryptocurrencies.
Shota Siradze, 28, has a technical education. He’s been involved in cryptocurrency mining since 2010. He has committed himself fully to this field for the last four years. His outlook on the field is overwhelmingly optimistic as he thinks that, sooner or later, official/financial relationships between two persons will no longer require a middle man.
Shota believes that devoting himself to the cryptocurrency business has had a positive impact on his life: “I myself am happy with my decision to commit fully to this field. I have more time to spare than I would if I were working a full-time job. I am fascinated by and believe in the technology it is built on and I’ve improved my financial standing.
“With an initial 80-100 thousand dollar investment, around 2,500 dollar monthly electricity fee and constant updates to my equipment which cost in the region of USD 8,000-10,000 a year, I can generate 3,5-4 Bitcoins; 35-40 Ethereum; and 8-12 Zcash coins a month,” Shota told us.
Temur Kurtskhalia, 21, studies informatics and control systems. Innovative tech is within his field of interest, so he naturally decided to find out what cryptocurrencies were all about. Upon closely examining the opportunities Blockchain technology presents, he was swift to decide he wanted to be knowledgeable in this sphere and be a participant in its meteoric rise.
Temur particularly values the fact that the Blockchain system is decentralized. Anybody can participate in this business, either through purchasing coins directly or by investing in mining equipment.
“I started mining around four months ago, the initial investment figure was around USD 4.000, but the entry fee can be much lower, with a respective outcome, naturally. Due to the specifics of my equipment, I prefer to mine Zcash and I think that it’s a promising investment.”
Temur, like many other miners, decided to borrow money from a bank to get his equipment. He expects to cover the costs in 7-8 months, however, instead of waiting out the results he decided to upgrade his equipment, for a more far-sighted outlook.
Besides the financial input, Temur has to dedicate around 3-4 hours daily to supervising equipment, keeping updated on the news and trade on the market. He, at the same time, shares his enthusiasm and knowledge with peers who have decided to jump into the cryptocurrency madness pond.
“I invested a symbolic sum in cryptocurrency, as the price of cryptocurrency depends on speculations and there are no mechanisms to determine its cost, at least I have not found any,” George Arveladze, Deputy CEO at Georgian Healthcare Group, told The FINANCIAL. George is the former CEO at Liberty Bank; the only bank in Georgia enabling trade with cryptocurrencies through an eMoney system.
A request by The FINANCIAL to provide an evaluation of their cryptocurrencies’ turnover and effect on the national currency, also to disclose the volume of transactions at eMoney, was left unanswered.
A bank representative said that some changes related to the trade with cryptocurrencies are being processed, after that the official position of the banks will be announced.
There was no response from Bitfury representatives either.
We asked the National Bank of Georgia about how cryptocurrencies can influence the national currency and how the bank is going to monitor transactions.
“NBG is monitoring developments related to the cryptocurrency business, including those taking place in other countries,” The FINANCIAL was told at NBG.
“NBG can’t initiate legislation changes, but in certain circumstances it will get involved in discussions and preparing legislation changes.”
“Cryptocurrencies have a minor influence on traditional currencies. However, rapid growth of market capitalisation and the popularity of cryptocurrencies may change the situation. That is why we monitor the situation and are ready to intervene.
“Most of the participants will lose money, because all things crypto are very risky and highly volatile,” commented Zurab Abuashvili, CEO at Investment Capital. “There are many such things, which can become even more, and it’s nearly impossible to forecast who will be the ultimate winners,” he said.
“We make investments in U.S. public company stocks. Our business model contradicts general trading strategies, including cryptocurrencies, because we do not understand how to value these things. If we do not understand, can’t analyze and value asset, we do not invest,” Abuashvili said.
Levan Khutsishvili, CEO and Founder of Winery Khutsuri, told The FINANCIAL that some of his colleagues, but not him, had got involved in the trade of cryptocurrencies.
“I do not think that we should legally accept cryptocurrency payments in Georgia. It is too early to talk about its legalization, as the market of cryptocurrencies is new and we are not aware of any risks related to this asset,” said Givi Adeishvili, Economic Analyst at Society and Banks.
“The national currency of any country is strengthened by certain factors, and under conditions where up to 1,000 different cryptocurrencies are issued with ‘unknown guarantees’, their asset value is still unstable and is not a saving opportunity. We can consider investors who are looking for high income and high risk as their customer. In the case of legalization, the state may increase its relevance and encourage the growth of demand. In the case of a small shock, it is uncertain what kind of loss we will get under a legalization policy.”
“If the Lari remains the only payment option in the territory of Georgia, which it is still up to this date, the impact of cryptocurrency on the monetary policy of Georgia will not be substantial. With its functionality, cryptocurrency will be limited to consumers only by collecting / saving and payment function in countries where it will be legalized.”
“The development of cryptocurrencies will be inconceivable without the involvement of central banks, since monetary policy implementing institutions should have control over the money supply process,” Adeishvili noted.
“Predicting what policies the Central Bank of any country chooses is difficult, but in the event of their involvement it is expected to increase the value of cryptocurrencies. If central banks do not legalize, cryptocurrency will remain part of the shadow economy. Cryptocurrency is a volatile asset for a banking sector prone to stability.”