The Caucasus, especially the countries within this region have never necessarily struck as attractions for crypto investment in the past. At least the region has not to be placated as the go-to destination for blockchain development. However, it's slowly becoming obvious that the countries in this region know what they're doing with fintech and are not prepared to back down for anybody.
The region has seen some of the biggest growth when it comes to the fintech environment, with one country claiming numerous prizes for having the most sophisticated online banking platforms in Europe and the world.
However, this article is dedicated to dissecting the region for its blockchain worth, and there's much to uncover.
Mining in the Caucasus
Although the Caucasus consists of 3 nations in total, Georgia is believed to be the biggest contributor to fintech advancement in the region. Armenia and Azerbaijan are also big players in the industry considering their neighbors and partners, but Georgia has been recognized as one of the biggest mining hubs in the world.
To be exact, the country of Georgia occupies third place in terms of crypto mining volume in the world. The first place belongs to China and the second to the United States. Now, many would say that Georgia does not deserve this title since most of the volume is mined by a foreign company called BitFury, but as long as the operations are conducted within its borders, the volume applies to this specific country.
Crypto regulation in Georgia is virtually non-existent. The local government believes that the industry has the potential of being the biggest contributor to the local economy, which is why regulation is very light.
Mining companies simply register as official corporations in the country and adhere to local labor laws. That's about it, the rest is up to the company to simply start their operations and not break any general laws. When it comes to mining guidelines, there are none to be heard of.
Another major reason why mining companies are attracted to Georgia is how cheap the operations are. For example, Georgia is notable for its extremely cheap real estate opportunities, which gives the company the opportunity to build, purchase or rent huge facilities for the mining farms. In fact, it's believed that Bitfury owns 2 two apartment buildings full of mining hardware.
Furthermore, we need to talk about how cheap electricity is in Georgia. The country is able to produce more than enough electricity for its needs. So much so that they focus on exporting it to neighboring countries while developing more and more facilities for production. Because of this, commercial use of electricity is extremely cheap for both regular citizens, as well as corporations.
And if we know one thing, it's that crypto mining operations consume extreme amounts of electricity. In fact, it's believed that during the crypto-winter, when crypto prices were down and mining costs skyrocketed, mining farms in Georgia still managed to remain profitable. 1 Bitcoin cost approximately $3,100 to mine in this country with all costs included.
The third biggest advantage is labor costs. The most an IT, development or engineering expert makes in Georgia is around $3,500 a month. Should a person with the same skills, experience and, equipment be hired in the US or the UK, it would cost the mining company nearly $10,000 each month per person.
Compiling all of these cost reductions together paint an amazingly profitable situation for most miners, but that does not mean that it translates into crypto trading as well.
Crypto Trading Is Popular - but Not on Local Exchanges
There have been only three attempts to have some kind of local crypto purchase/sell opportunities in the country. Two of them have managed to remain in business for the long term, but it needs to be considered that they were not crypto exchanges.
What this means is that these two platforms were simply hot wallets where people could buy cryptos with cash and later transfer them to other crypto exchanges. The Georgian cryptocurrency exchange didn't necessarily succeed due to very low trading volumes. This may have indicated a low interest from the public, but the reality is much different.
The majority of Georgian crypto investors trade small tokens and try to avoid things like Bitcoin, Ethereum and Litecoin.
The Next Crypto Hub?
It is unlikely for Georgia or the Caucasus to become the next crypto hub in the grand scheme of things, simply because it's not a stable political situation. The region is still suffering from Post-Soviet fallout, which means that laws can change within seconds without notice, thus endangering all of the investments made into the crypto mining industry within the country.
In fact, most of the countries in the region have been going downhill for a while in terms of democracy and FDI. Georgia especially has been seeing major political scrutiny from an important ally, the United States.
It is likely that for the next couple of years, the region will remain a profitable destination for crypto operations, but that's about it. In terms of becoming crypto hubs, major concessions will have to be made in favor of developing the fintech industry.