OMM Newsroom
Georgia is expanding preparations to create a digital version of its national currency, AnewZ reported. Parliament has approved the legal framework, while the National Bank of Georgia is working on pilot projects. A nationwide rollout could still be years away.
The National Bank of Georgia is examining how a digital lari could operate alongside existing forms of money. It is also considering tokenisation, stablecoins and ways to upgrade the country’s payment infrastructure. The bank’s Governor, Natia Turnava, spoke about the plans at the Tbilisi Financial Summit.
The initiatives align with Georgia’s goal of becoming a regional financial technology hub. The digital lari, however, remains at the research and testing stage.
“We are currently testing pilot projects related to the digital lari and exploring ways to promote tokenisation in cooperation with relevant state agencies,” Turnava said. She added that the central bank aims to position Georgia as a hub for new financial technologies.
The National Bank of Georgia is also upgrading its real-time settlement infrastructure with support from international partners, including the World Bank.
What is a digital lari?
A digital lari would be an electronic form of Georgia’s national currency, issued and backed by the central bank. Unlike deposits held at commercial banks or privately issued cryptocurrencies, it would be a direct liability of the National Bank of Georgia and would retain the same nominal value as the traditional lari.
The digital lari would be a central bank digital currency. As digital payments become more widespread, countries around the world are increasingly exploring and testing such currencies.
Unlike cryptocurrencies, whose value can fluctuate sharply, the digital lari would be tied to Georgia’s national currency. The central bank would determine how it is designed, distributed and used.
The National Bank of Georgia says its research aims to establish whether the technology would benefit the country; the preparations are not intended to lead to an immediate nationwide launch.
Davit Utiashvili, head of the National Bank of Georgia’s Financial Stability Department, said on October 21 that the pilot projects would assess the currency’s potential benefits, costs and technological challenges, as well as possible risks and ways to address them.
He said central bank digital currencies could play an increasingly important role in the financial system as technology develops.
Parliament approves legal framework
Georgia’s parliament has taken a significant step towards a digital lari by fast-tracking amendments to the organic law on the National Bank of Georgia.
The legislation gives the National Bank of Georgia exclusive authority to issue a digital currency. The currency would remain an unconditional liability of the central bank and retain its nominal value.
The amendments also give the central bank authority to manage the volume of cash and digital currency and determine issuance plans.
A key provision prohibits issuing a digital lari to finance the state budget deficit.
Although the legislation makes it possible to introduce a digital currency in the future, it does not mean Georgia will necessarily put one into circulation. The National Bank of Georgia has said a nationwide rollout is not expected in the coming years.
Banks wary of liquidity risks
The prospect of a digital lari has raised concerns in Georgia’s banking sector, particularly about its potential impact on liquidity and the amount of digital currency individuals and businesses might be allowed to hold.
Alexander Dzneladze, president of the Georgian Banks Association, has urged a cautious approach. He pointed to regulatory uncertainties and ongoing discussions about central bank digital currencies in the European Union.
One of the main concerns is that customers could transfer large sums from their commercial bank accounts into digital lari.
If a central bank digital currency became an attractive alternative to traditional deposits, such transfers could put pressure on banks’ liquidity and limit their ability to lend. For that reason, holding limits for individuals and businesses could be important.
Dzneladze said the challenges go beyond cybersecurity and also involve broader questions about managing the money supply.
“For now, we are assessing the issue and, to be frank, taking a somewhat more cautious approach,” he said.
Fintech sector sees opportunities
Despite concerns in the banking sector, fintech representatives believe a digital lari could bring economic benefits.
Davit Kikvidze, head of the Fintech Association, said a digital lari could strengthen the National Bank of Georgia’s ability to implement monetary policy and help decisions have a faster impact across the economy.
He said the technology could improve the central bank’s response to inflation by shortening the time between policy decisions and their effects on economic activity.
Kikvidze also highlighted the potential for more flexible payments, better access to funds and the modernisation of financial services. These changes could support broader economic growth.
Much will depend, however, on how the currency is designed, whether the public adopts it and whether it can operate without destabilising the banking system.
Georgia’s pilot projects are intended to help answer these questions.
The creation of a legal framework has brought Georgia one step closer to a possible digital lari. Whether the currency is issued will depend on whether trials show that its economic benefits outweigh the risks.
