Obtaining a cryptocurrency licence enables companies to legally conduct crypto-related business operations in compliance with the regulations of their chosen jurisdiction. This article outlines key aspects of securing permissions for crypto ventures across prominent regulatory domains.
What constitutes a crypto licence?
A cryptocurrency licence represents formal authorisation from statutory bodies permitting corporate entities to offer products and services associated with digital assets in said territory. Firms can apply for an overseas crypto licence in countries that have implemented a legislative framework to govern cryptocurrency activities and codified rules of market conduct plus issuance prerequisites.
By licensing trading platforms, authorities guarantee client assets remain protected since exchanges must satisfy pertinent legal criteria and standards. Unlicensed exchanges often eschew extensive user identity verification, creating opportunities for financial crimes.
The regulatory environment for cryptocurrencies varies enormously across nations. Some prohibit or severely restrict crypto transactions. Meanwhile, others adopt a more constructive neutral or pro-crypto stance. Owing to the profound complexity and uncertainty inherent in overseeing a rapidly evolving technological domain like decentralised finance, forging international regulatory harmonisation remains challenging. However, many industry stakeholders are lobbying for more entrenched governance to foster greater commercial clarity and confidence.
The subsequent sections outline the most sought-after regulatory jurisdictions in Europe, the US, and Asia, highlighting country overviews plus specific crypto asset controls and licensing prerequisites. As virtual currencies proliferate worldwide, authorities are formulating bespoke regulations to supervise them. Much governance is still under development and rules diverge extensively depending on crypto categorisation as payments, investments, or securities.
Navigating leading European cryptocurrency jurisdictions
European Union crypto regulation: Prioritising compliance across borders
While cryptocurrency usage in the UE is legal, individual member states govern asset exchange rules separately. EU regulators currently designate virtual currencies as qualified financial instruments subject to supervision by national authorities. Obtaining crypto licence in the UE enables streamlined cross-border operations.
- AML Directive in 5th and 6th editions provide classification of cybercrimes and rules about checking customers' information, reporting transactions, etc.
- In September 2020, Markets in Crypto-Assets (MiCA) rules marked licensing arrangements for crypto asset issuers, industry codes of conduct and bolstered consumer protections.
Malta: Embracing innovation through balanced regulation
Aiming to emerge as a European fintech leader, Malta has attracted major industry players since implementing its 2018 cryptocurrency framework spanning exchanges, initial coin offerings (ICOs) and adjacent technologies.
Operators planning Maltese ICOs must note continual transaction monitoring by the Malta Financial Services Authority per the nation’s Virtual Financial Assets Act. Obtaining a crypto licence in Malta requires applicants to incorporate a Maltese entity, establish compliant governance, onboard skilled compliance staff, develop policies safeguarding client assets and secure a VFAA Class 4 licence enabling:
- VFA exchange activities
- Custodial, wallet, and key holding services
- Nominee services pertaining to VFA exchange
Estonia: Streamlining participation for compliant players
An early trailblazer in Europe’s regulated cryptocurrency environment since 2017, Estonia has tightened framework stringency significantly. Over 1,000 previously issued licences faced revocation for non-adherence to toughened anti-money laundering rules equalising crypto providers and financial institutions.
Former separate trading and wallet licences are now consolidated under a unified Cryptocurrency Exchange Licence, with steeply heightened capital minimums up to €350,000 contingent on services rendered. Stringent premises and residency requirements are also in effect for obtaining a crypto licence in Estonia.
While sparing cryptocurrencies value-added tax, Estonia deems them taxable digital assets. Its streamlined VASP licence necessitates registering an Estonian company, retaining resident director(s) and compliance staff locally alongside concrete commercial premises.
Lithuania: Promoting accessibility and compliance
Leveraging extensive fintech experience, Lithuania provides clear cryptocurrency licensing protocols, distinguishing it as an increasingly favourable European jurisdiction.
It offers distinct licences respectively enabling exchange trading commissions and depository wallet solutions. Online registration for obtaining a crypto licence in Lithuania is facilitated for international applicants without local presence requirements. Compliance responsibility for money laundering and ethical diligence falls under Lithuanian financial crime authorities.
Gibraltar: Pioneering balanced blockchain regulation
Under Gibraltar’s forward-looking DLT framework, cryptocurrency exchanges operate legally subject to local financial services registration and ongoing compliance. By sparing crypto income from taxation while levying only 10% corporate tax, Gibraltar draws many blockchain innovators focused on upholding market integrity.
Its 2018 DLT rules enabled regulated blockchain projects through calibrated controls, balancing disruption against investor protections and financial crime prevention. Ongoing enhancements in obtaining Gibraltar's crypto licence continually align with global anti-money laundering standards and emerging cryptocurrency best practices steered by working groups of major jurisdictions.
Navigating key global cryptocurrency licensing frameworks
Navigating cryptocurrency licensing in the United States
Despite lacking overarching federal legislation, US regulators continue defining bespoke cryptocurrency governance. As adoption accelerates, associated obligations intensify. Differing agency designations cause confusion - the SEC deems certain tokens as securities while the CFTC categorises cryptocurrencies as commodities. The IRS regards them as taxable property.
Registering an American cryptocurrency exchange necessitates securing a licence from the Financial Crimes Enforcement Network (FinCEN) under Bank Secrecy Act (BSA) anti-money laundering duties. Firms must then implement compliant protocols for customer verification, transaction recording and regulatory reporting.
SEC guidance also mandates securities-linked wallet and exchange operations satisfy pertinent legal provisions. More constructively, the CFTC enables regulated platforms to publicly list approved virtual commodity assets.
When applying for an American crypto licence, typical prerequisites comprise:
- FinCEN Registration as Money Services Business
- Satisfactory AML policy implementation with a dedicated compliance officer
- Demonstrable capital adequacy
- Personnel training in AML protocols
- Independent customer verification and transaction validation
- Acquiring state money transmitter licence/s
While specific documentation varies by state, applicants must generally submit requisite licensing forms/fees, business plans, AML programs, and background checks.
With responsive governance maximising market integrity, the USA remains open to ethical actors progressing cryptocurrency advancement.
Singapore: fostering responsible innovation
Singapore sustains a supportive environment for lawful cryptocurrency exchange sans legal tender status. Cryptocurrencies constitute taxable “goods” while the Monetary Authority of Singapore (MAS) oversees the fintech industry, having cautioned on investment risks.
The 2019 Payment Services Act mandated strengthened checks for exchanges and adjacent crypto businesses under MAS’ aegis. Securities token offerings also often fall under the Securities and Futures Act. Consequently, obtaining Singapore crypto licences enables compliant innovation through calibrated regulation.
Proposed 2020 measures seek to further align with global anti-money laundering standards and mandate stricter technological safeguards for crypto asset service providers.
Canada: Promoting secure market integrity
Canada has actively regulated cryptocurrency service providers within provincial securities laws since 2014. Positioning cryptocurrencies as investment vehicles, Canada requires obtaining crypto licences to adhere to stringent auditing, record-keeping and reporting standards comparable to fiat currency institutions.
The 2020 amendments considerably expanded these diligence obligations, mandating FinTRAC authorization alongside vital data retention regarding all client cryptocurrency transactions. With responsive oversight fostering transparency, Canada remains open to ethical actors furthering secure sectoral growth.
Australia: Bolstering compliance to match innovation
Australia has likewise taken decisive regulatory action, emphasizing anti-money laundering compliance across its flourishing cryptocurrency industry. To obtain a crypto licence in Australia, exchanges must register under the auspices of AUSTRAC subject to stringent verification, auditing and reporting policies.
Dovetailing with constructive taxation guidance classifying cryptocurrencies as capital assets, the Australian Securities and Investments Commission also released updated token and exchange regulations in 2019 to safeguard investors against attendant risks.
With clear policy signalling augmented investment protections alongside continued exchange licensing, Australia sustains amenable conditions for compliant cryptocurrency enterprises.
Cayman Islands: Prioritising global standards
The Cayman Islands significantly strengthened its cryptocurrency governance in 2020, aligning with intensified global anti-money laundering and counter-terror financing efforts. Consequently, organisations providing pertinent services to local or international clients must now acquire registration as Virtual Asset Service Providers (VASPs) from the Cayman Islands Monetary Authority.
Emphasizing known risk vectors around custody and exchange, mandatory crypto licensing in the Cayman Islands evaluates applicants’ competencies, policies, and resources to safely conduct such cryptocurrency activities at scale. Eligibility also requires meeting minimum capital, disclosure, and insurance thresholds.
By elevating industry standards, the Cayman Islands bolsters its reputation as a credible global hub for virtual asset innovation through prudent regulatory design.
With these tailored insights, cryptocurrency enterprises can readily determine opportunities across leading jurisdictions, cultivating compliant sectoral growth.
Regulation of cryptocurrency activities internationally is complex, with requirements varying depending on each state's jurisdiction and international requirements. Businesses operating in this area must navigate various regulatory frameworks at both the national and international levels. Below is a brief summary of the requirements. For precise advice tailored to your specific jurisdiction, you can consult our legal experts.
- AML and customer due diligence
Companies providing cryptocurrency exchange or wallet hosting services are required to implement AML/KYC protocols. Robust customer identification processes must be implemented, and suspicious transactions must be reported in accordance with relevant guidelines.
Many leading countries require companies to obtain special licences to access their markets. Candidates undergo regulatory review to demonstrate that the control policies adopted meet established compliance standards.
- Tax obligations
The tax regime is not standardized. Thus, many European jurisdictions impose capital gains tax on transactions. To avoid penalties, traders, and investors must record asset disposals and report them to tax authorities as required.
- Consumer rights and data protection
Strict consumer protection laws govern cryptocurrency businesses throughout the EU, North America and many island jurisdictions. Transparent communication of risks in addition to terms of service is essential. Segregation and security of client assets is mandatory.
- Securities management
For example, organizations that facilitate ICOs capital raising activities must ensure full compliance to avoid regulatory violations.
Who and what can help companies in obtaining a crypto licence
- Foremost, it's essential to seek assistance from legal professionals with expertise in cryptocurrency law.
- Research and contact the relevant regulatory authorities in the specific country where you intend to obtain a cryptocurrency licence. These authorities can provide detailed information on the application process, requirements, and any recent updates to regulations.
- Work with compliance experts who understand the intricacies of cryptocurrency regulations. They can help you establish robust AML/KYC/CTF procedures, which are crucial components of regulatory compliance.
- Attend industry conferences, seminars, and networking events focused on blockchain and cryptocurrency. Establishing connections with professionals in the field can provide valuable insights and recommendations for legal assistance.
Remember, the process of obtaining a cryptocurrency licence can be intricate, and compliance is paramount to the success of your venture. Always consult legal professionals who specialize in cryptocurrency law to ensure that your business adheres to all relevant regulations and operates within the bounds of the law.
We hope, these concise summaries help you to swiftly ascertain opportunities across leading jurisdictions. Each nation presents strong credentials through balanced framework design, fostering local development alongside broader financial system security.
Our specialists continuously track regulatory shifts across key global jurisdictions to furnish bespoke intelligence per client interests. We invite inquiries regarding navigating cryptocurrency licensing processes in the USA, Europe or Asia by completing our online contact form. With extensive experience liaising with international regulators and advising blockchain innovators on customised solutions.
Whether building next-generation infrastructure or integrating tokenised programmes, secure the ideal jurisdiction to match your ambitions while mitigating compliance risks. From aligned agencies to licensing timeframes and costs, our dedicated team stands ready to guide your global launch and sustained success.