Warning from the National Bank of Georgia
The National Bank of Georgia (NBG) urges citizens considering investments in various financial assets or instruments to exercise due caution and verify whether the intermediaries offering investment opportunities in these products are appropriately licensed.
As a rule, intermediary activities related to investments in financial products require a license issued by the relevant regulatory authority. Conducting such activities without the required authorization may constitute a criminal offence under Georgian legislation, specifically, illegal entrepreneurial activity.
It should be noted that financial products include not only traditional financial instruments, such as shares, bonds and other securities, including tokenized securities, but also more complex financial derivatives, such as contracts for difference (CFDs) and binary options.
A contract for difference (CFD) is a contract under which an investor agrees to receive or pay an amount corresponding to the difference between the initial price or level of the relevant underlying asset or indicator, recorded when the CFD position is opened, and its subsequent price or level, recorded when the position is closed. The underlying asset of a CFD may include, among other things, a security, currency, commodity (e.g. a precious metal) or virtual asset (including cryptocurrency), while the underlying indicator may be an interest rate, exchange rate, index or other indicator. The commercial name of a contract is not decisive in determining whether it qualifies as a CFD. For example, so-called “perpetual futures” or “perpetual contracts”, which have become increasingly widespread recently, may also qualify as CFDs, depending on their characteristics.
A binary option is a type of contract under which an investor receives or pays a monetary amount depending on whether a predefined event relating to the price of an underlying asset or an underlying indicator occurs by the time the contract expires. As with CFDs, the underlying asset of a binary option may include, among other things, a security, currency, commodity (e.g. a precious metal) or virtual asset (including cryptocurrency), while the underlying indicator may be an interest rate, exchange rate, index, inflation rate or other indicator. Here, too, the commercial name of a contract is not decisive in determining whether it qualifies as a binary option. In this regard, it should be noted that so-called “prediction markets” have become increasingly widespread recently, offering potential investors the opportunity to trade contracts based on the occurrence of specific events (so-called “event contracts”). Potential investors should exercise particular caution when the event in question is linked to any of the aforementioned financial assets or indicators, as offering such contracts may require a license from the relevant regulatory authority.
The NBG once again warns the public to exercise particular caution when dealing with entities that offer investment opportunities in the aforementioned financial products. The NBG also urges citizens to verify whether these entities are licensed by the relevant regulatory authority.
The lists of brokerage companies, investment funds and asset management companies, and commercial banks licensed by the National Bank of Georgia are available on the NBG’s official website: