Georgia's Stablecoin Regulation: Great for Users, Hard for Issuers

President of the National Bank of Georgia has approved a new regulation governing the issuance of stablecoins in Georgian jurisdiction.

One provision in this regulation appears likely to distinguish stablecoins issued by Georgian companies from most stablecoins issued elsewhere. Holders will have the right to redeem them at face value at any time. The rule even sets a clear deadline: the issuer must fulfill the redemption request within three business days after receiving it.

This is a good moment to recall something that is often overlooked. Most centralized stablecoins - such as USDT, USDC, and similar tokens - do not come with a binding obligation for the issuer to redeem them for dollars at par upon request by any holder.

As far as I remember, the last major stablecoins where the issuer voluntarily assumed such an obligation were Binance USD (BUSD) and Paxos Standard (PAX), both issued by Paxos. Paxos Standard was later replaced by USDP, while BUSD was eventually shut down under regulatory pressure.

If any company decides to issue stablecoins under Georgia's new rules, those tokens could become some of the safest stablecoins available to users. In that sense they would resemble Liquity USD, where redemption into ETH at market price is enforced by a smart contract, or DAI, which can always be redeemed for the collateral backing it.

The real question, however, is who would actually choose to issue stablecoins under Georgian rules if other jurisdictions allow issuers to operate without such a strict redemption obligation.