Official currency accesses private chain channels, Georgia takes a crucial step ahead.

Written by: Liam Akiba Wright

Translated by: Chopper, Foresight News

Tether and the Georgian government plan to launch a stablecoin, which connects the national fiat currency to a private stablecoin payment system, ahead of regulatory frameworks being finalized in most countries. The core product of this collaboration is GEL₮, a stablecoin pegged to the Georgian lari.

According to an announcement released on May 25, GEL₮ is designated as the official stablecoin of Georgia, incorporated into the country's digital asset regulatory framework. The project aims to lower transaction costs, achieve near-instant settlement, support programmable payments, and promote the development of cross-border trade, fintech, and digital payment sectors.

This indicates that the project is not merely about issuing a new token. Georgia aims to leverage GEL₮ to build a new payment infrastructure based on an asset circulation system priced in lari while striving for compatibility between its regulatory rules and the emerging stablecoin regulatory framework under the U.S. GENIUS Act.

Tether can bring scale effects and channel advantages to the project, but the announcement did not clarify core implementation details: who will specifically issue GEL₮, where the reserve assets will be stored, the scope of redemption entities, supported public chains, and the boundaries of official regulation remain unresolved.

Fiat currency enters the private stablecoin channel

GEL₮ stands at the intersection of two main independent development trends: on one hand, governments around the world are successively introducing stablecoin regulatory rules; on the other hand, private entities are continually building the underlying payment channels used in mainstream markets.

Georgia also attempts to join this trend. Unlike the mainstream dollar-pegged stablecoins in the crypto market, GEL₮ is pegged to the local currency, the lari, and has government backing, which is a policy advantage not possessed by most fiat-backed stablecoins.

The National Bank of Georgia has previously completed the relevant arrangements. In March of this year, the bank introduced regulatory rules for the issuance of stable digital assets, intending to enhance consumer protection and risk control, and align the industry with international standards. This means that the stablecoin project has a private technological infrastructure provided by Tether, as well as domestic regulatory systems as support.

This regulatory rule applies to all compliant digital asset service institutions and clarifies that no stablecoin issuance activities may take place within the country without permission from the National Bank of Georgia.

The core positioning of GEL₮ is as a payment infrastructure, rather than just a trading asset.

Although stablecoins possess rapid settlement characteristics, they can only be widely trusted by enterprises, wallets, exchanges, and payment service providers if legal rights, reserve models, redemption processes, and payment channels are all clearly defined and implemented.

If this model works smoothly, Georgia will reap significant benefits. Local financial institutions and cross-border enterprises can utilize blockchain networks to circulate lari assets, freeing themselves from the timeliness limitations of traditional bank settlement channels. At the same time, the country may become a typical example, exploring how the fiat currencies of small and medium countries connect to crypto payment systems, rather than completely yielding the foundational payment layer to dollar-pegged stablecoins.

However, the project also carries notable risks. If there is excessive reliance on the infrastructure built by private entities, users may enjoy faster circulation speeds and broader coverage but would also develop new external dependencies in areas such as asset custody, account freezes, redemption rights, public chain adaptation, and reserve information disclosure.

Why Tether and Georgia's stablecoin plan is important

Tether's entry makes the industry significance of this cooperation far exceed that of a typical local pilot. CryptoSlate data shows that as of May 25, USDT price stabilized around $1, with a market value of about $189 billion and a 24-hour trading volume of several billion dollars.

USDT is a core liquidity vehicle in the crypto space, widely used in trading pair settlements, dollar clearings, decentralized finance liquidity provision, everyday payments, cross-border remittances, and on-chain transfers.

With its large business volume, Tether has accumulated operational experience that is difficult for government pilot projects to match: its tokens have adapted to multiple public chains, and the massive user base has long viewed the stablecoin as a practical payment and settlement tool, rather than merely a speculative asset.

However, business scale does not equal public accountability. There are widespread concerns within the industry that USDT still has many risk factors, including peg stability, reserve assets, redemption channels, issuer control, compliance, cross-chain transfer risks, and market confidence issues.

When a stablecoin is linked with a national fiat currency and bolstered by government credit, the aforementioned risks become more sensitive.

The announcement stated that Georgia considered requirements such as reserve asset management, user redemption rights, issuer regulation, and anti-money laundering compliance when designing the regulatory framework, but the specific structure, implementation timeline, and regulatory details of GEL₮ are yet to be disclosed.

Currently, this project belongs to forward-looking policy planning, rather than a mature payment system that has already been implemented.

The details awaiting disclosure are far from trivial technical issues; they directly determine several core rules: who has recourse to the reserve assets, whether users can quickly redeem at face value, whether ordinary retail investors have direct redemption rights or can only operate through intermediaries, how law enforcement and sanction-related requirements are implemented, and the contingency plans if the supporting public chain experiences congestion, security vulnerabilities, or declines in commercial value.

Georgia and Tether have also proposed a design approach for regulatory interoperability. The announcement indicated that the country's rules strive for compatibility with the emerging stablecoin regulatory framework in the U.S. The U.S. Treasury is set to officially implement the GENIUS Act in July 2025.

Even without formal recognition from the U.S. government, the GENIUS Act remains the core basis for Georgia's benchmarking reference.

The U.S. Congress clearly stated in the act that compliant payment stablecoin issuers must hold sufficient liquid assets as reserves, ensuring that the scale of reserve assets matches the circulating tokens at least on a 1:1 basis.

A series of recent supporting details from the U.S. focus on regulating issuer qualifications, business scale, and industry access permissions. This is crucial for Georgia: the value of rule compatibility ultimately depends on whether it can gain practical recognition from foreign cooperating institutions, exchanges, banks, and payment service providers.

Georgia can replicate U.S. regulatory standards in areas like reserves, redemptions, and compliance but cannot influence the official stance from the U.S. The core conflict lies in the fact that even if the rules align internationally, market participants will still focus on whether this framework can provide users with legally enforceable rights, and whether overseas institutions recognize GEL₮ as a legitimate payment infrastructure.

At the user level, the core demand is very clear. Can the local currency stablecoin accelerate payments while ensuring that the legal protections for users are not weaker than those provided by traditional compliant banking systems?

Implementation is the ultimate test

The success or failure of GEL₮ depends on details that have yet to be clarified.

First, the issuing entity. The rules from the National Bank of Georgia require relevant businesses to be operated by licensed digital asset service providers and must obtain regulatory approval, yet the announcement does not specify the exact issuer of GEL₮ nor the distribution of responsibilities among Tether, Georgian officials, and local partners.

Second, reserve assets. As a stablecoin pegged to the lari, the market urgently needs clarity on the composition of reserve assets, where they will be stored, the frequency of information disclosure, and contingency plans for large-scale concentrated redemption scenarios.

Third, circulation channels. On-chain settlement speed is a basic advantage of stablecoins, but the project must establish stable deposit and withdrawal channels. Enterprises will be concerned about whether mainstream wallets, exchanges, banks, payment institutions, and public service platforms support this token; ordinary users care whether they can redeem GEL₮ for lari at face value, without hidden price differences, and that redemption rights are not restricted for ordinary users.

Fourth, legal sustainability. Tether's infrastructure allows GEL₮ to be deployed faster than central bank sandbox pilot products; however, it also means that a private entity has become the core part of a national currency payment experiment.

This may represent a new model required for the widespread adoption of stablecoins, but it might also further highlight the irreconcilable contradictions between public currency and private payment channels.

Georgia has taken a step ahead, striving to shape the discourse power of regional stablecoin infrastructure while major economies are still in the phase of implementing regulations. However, this also means that the focus of the project will quickly shift from external announcements to practical implementation.

If subsequent details can clarify issuing qualifications, ensure reserve transparency, fulfill executable redemption rights, and establish comprehensive payment channels, GEL₮ is likely to become a landmark case: operated by a leading global private issuer and incorporating fiat currency into the stablecoin circulation system.

Conversely, if core details remain vague, the project can only reflect the exploratory direction of regulatory agencies in various countries, also indirectly proving that native currency stablecoins still have a long way to go before widespread commercial use.