Сrypto license
Obtaining a crypto broker license is a must to legally conduct licensed crypto exchanges and other activities. Once you obtain such a license in one country, you can provide crypto activities in various crypto markets. This means you could work with clients from different countries, legally promote your projects, and a lot of other benefits.
Obtain a crypto license
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What is a crypto license?
Crypto licenses open up many opportunities and create advantages for companies. That is, companies are authorized to conduct operations ranging from cryptocurrency exchange to virtual asset transfers.
Obtaining a crypto license allows you to legally:
- exchange crypto, virtual, and fiat currency;
- store currency on behalf of your clients;
- transfer of virtual currency;
- promote your projects;
- keep accounts related to crypto assets (custody services);
- etc.
A cryptocurrency license confirms a high level of trust, regulatory compliance, and security of the company’s operations. You will be able to do business in crypto-friendly countries, such as the UK, Lithuania, Estonia, Canada, Poland, and many others.
Why get a crypto license with us?
You will acquire the best option for your cryptocurrency business by picking Fintech Harbor to receive a license. Our experts will assist you in selecting the most advantageous and convenient country to register your company in. Fintech Harbor lawyers are aware of the unique requirements for acquiring a crypto brokerage license in various jurisdictions. With us, you’ll get a license to let you legally do cryptocurrency-related business, including exchanging and storing them.
Types of cryptocurrency licenses
The classification of crypto licenses varies across jurisdictions. A wide range of licensed crypto activities are outlined in the MiCA (Markets in Crypto-assets) Regulation. It is an EU legislative act which implements unified crypto regulation in EU member states. It will take effect in 2024-2025. Mica provides the following types of licensed crypto activities:
The custody and administration of crypto-assets on behalf of third parties
A crypto custodian is the keeper of the private keys that ensure your crypto assets are hard to access. Providers of this service must keep records and register any movements of cryptocurrency. They have to strictly separate their funds from clients’ funds. Crypto custodians do not store the assets themselves. Instead, they keep a cryptographic private key which gives access to your assets.
The operation of a trading platform for crypto-assets
CTPs are online systems that bring together buyers and sellers of crypto-assets. Such platforms allow them to carry out transactions and trades. Some CTPs allow users to buy and sell crypto-assets, receiving them instantly in their wallets. In this case, the user buys, and the platform must deliver the assets directly to the user’s wallet, where they have full control.
Other CTPs hold onto the crypto assets in a platform-controlled wallet. This means users depend on the platform. Their crypto assets stay on the platform. The platform controls them until users move them to their wallets or exchange them for fiat currency.
The exchange of crypto-assets
Crypto exchanges allow you to trade with other users without a third party. Exchanges allow traders to sell and buy amongst each other based on current market prices. Crypto exchanges can be centralized or decentralized.
Centralized Exchanges (CEX) are like regular banks for crypto. They handle transactions between users, offer a marketplace, and make sure everything follows the rules. But, your crypto is in their wallet, so it’s not entirely in your control, which can be risky.
Decentralized Exchanges (DEX) are different. No middleman or central authority is involved. Transactions go directly from one user to another using smart contracts on a blockchain. You’re in control of your funds, but that also means you’re responsible for their safety.
The execution of orders for crypto-assets on behalf of third parties
When a company executes orders for clients in the crypto market, it means they’re making agreements to buy or sell cryptocurrencies for those clients. This can also involve subscribing to cryptocurrencies on behalf of clients. In doing so, the company must always act in the best interest of the client and take all necessary steps to get the best possible deal for them.
Placing of crypto-assets
The main purpose of such CASPs is to promote crypto-assets to potential buyers on behalf of the seller. The placing of crypto-assets is purely about marketing. It’s done for the seller’s benefit. This service is for the people or organizations selling crypto-assets. If the firm also interacts with the buyers in other ways that meet specific criteria, it could be considered as providing other crypto-asset services.
Transfer services for crypto-assets on behalf of third parties
Such CASPs provide services of transfer, on behalf of a natural or legal person. Crypto assets move from one distributed ledger address or account to another.
The reception and transmission of orders for crypto-assets on behalf of third parties
Such CASPs receive orders from clients for cryptocurrency buy or sale. However, they do not directly take part in the transaction. They transfer such orders to a third party. Usually, CASPs place such orders on trading platforms. The main purpose of such providers is to find your order a suitable match from other user’s orders. Once a suitable match is found, the service facilitates the transaction. This way, you don’t have to personally find someone to trade with. The service does the matchmaking for you.
Advice on crypto-assets
Providing advice on cryptocurrency assets is a type of investment advice. It can be provided both at the request of the client and at the initiative of the CASP. Providing personal recommendations involves direct communication with the client. Such recommendations must follow the client’s personal circumstances.
Portfolio management on crypto-assets.
Portfolio management is the process of selecting and managing a group of investments. In crypto, this means selecting different tokens and coins. The portfolio can include one or more cryptocurrencies. The main goal is to meet specific financial results and mitigate risks. The portfolio management of crypto assets is carried out within the limits established by the client. The expected return of the portfolio is a typical financial aim. The provider must apply an individual approach to each client.
Benefits of obtaining a crypto license
The legitimacy of business.
The most essential reason to acquire a crypto license is to prevent legal problems. Crypto providers operate in a highly regulated market that carries significant penalties for violation. A crypto license ensures conformity with all applicable laws and regulations.
Trust and reliability
The crypto license also helps the business to come out as a dependable and trustworthy institution from the client’s perspective. A potential client always prefers a licensed provider over an unlicensed one. Cooperation with an authorized provider is more reliable and less risky. The crypto license serves as a tool to attract new customers.
Relations with banks
Many banks refuse to collaborate with CASPs due to the high risk of crypto activities. Cryptocurrency authorization makes it easier to get access to traditional banking services.
Business expansion
Another advantage of acquiring a crypto license is the opportunity to do business globally. Having a crypto license from a reliable regulatory body may simplify licensing procedures in other jurisdictions.
Investor confidence
The crypto license serves as a green light to investors that the entity complies with regulatory requirements. In this aspect, a crypto license is more than just a legal need. It is a strategic move that has the potential to increase investor confidence.
Problems with getting a crypto license
Changing Rules
Crypto license rules are always shifting, and they’re different in each country. If you work in multiple places, you have to follow many rules, which can be tough.
Expensive cost
In crypto-friendly countries, getting a license can cost a lot, from thousands to tens of thousands of euros. You might also need to invest a ton of money upfront, sometimes hundreds of thousands of euros. Plus, running a licensed business means ongoing costs.
Tough Requirements
Cryptocurrencies and blockchain are new, so the laws around them are often unclear and can change. To get a crypto license, you need to understand and follow these complex rules. The main issue is that they’re not the same everywhere.
Financial Monitoring and Checks
Crypto transactions have risks, and they’re watched closely. This includes getting licenses for payments and following tax rules. Many countries also require you to do identity checks and anti-money laundering checks.
Security Is a Must
Lots of countries want strong security for data, to prevent money laundering, and to stop financial fraud. If you deal with blockchain, you need to focus on cybersecurity to protect customer money and stop cyberattacks.
The process of obtaining a crypto license
To obtain a cryptocurrency exchange license or cryptocurrency broker license, one must first select a jurisdiction and then register a legal entity in that country. After that, you need to collect a package of documents that includes information about the non-conviction of the director and shareholders, biographies of responsible persons, a detailed description of the activities, and the company’s website.
It is also necessary to appoint a compliance officer and a responsible representative for submitting documents to government agencies. After that, you need to pay a state fee and wait for a cryptocurrency license.
Requirements to combat money laundering broker provide?
Cryptocurrency markets have expanded rapidly in recent years. The amount of money flowing through these platforms has also grown. In response, regulatory demands from policymakers and financial institutions have intensified. Governments around the world are grappling with ways to control the industry of crypto licenses.
They use different methods from imposing restrictions to outright bans. The problem is that the progress of crypto assets can become difficult to contain. Global and national regulators are announcing new rules to address these issues.
To meet international standards, cryptocurrency companies and exchanges are currently under pressure. They need to install comprehensive AML screening procedures to claim crypto licenses. The anonymous nature of cryptocurrency transactions has made them attractive for money laundering. By allowing unverified transactions, cryptocurrency companies not only endanger their reputations. They also face the possibility of fines, bans and other serious consequences. AML compliance in the cryptocurrency industry is crucial for a variety of reasons. A risk-based approach, starting with a thorough risk assessment, remains the focus. Regular risk reassessments are necessary, especially given the rapid pace of regulatory change.
There is the risk of obfuscation of money and other money laundering typologies. To conceal their activities, criminals use a variety of strategies, including off-chain transactions. Compliance issues also arise from a personnel perspective. Thus, small cryptocurrency companies lack the structure and resources available to larger enterprises.
Companies in the cryptocurrency industry are on the verge of a tipping point as governments around the world begin outlining their regulatory framework for cryptocurrencies. The firms should stay on top of the current state of AML compliance for crypto licenses. And expect it to evolve in the coming months.
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The crypto license in Europe
The European crypto license allows you to operate lawfully in the EU. It enhances transparency in the crypto business. It also builds confidence among consumers, partners, and state authorities. Currently, each crypto-friendly EU country has its regulatory framework for cryptocurrencies.
However, on April 20, 2023, the European Parliament passed MiCA, making it a ground-breaking piece of international legislation. MiCA aims to govern markets for crypto assets and related services. It intends to offer a unified licensing framework for all EU member states to standardize legislation on cryptocurrency.
Comparison of crypto license requirements in popular jurisdictions
General information
The crypto license in Estonia is a special permit to perform commerce associated with digital assets. An authorized legal document is required. This type of activity is regulated by the FIU (Estonian Financial Intelligence Unit).
The Polish version of the authorization to conduct activities with virtual assets is not a crypto license (in its usual sense), it is necessary to make a point on this. Polish crypto-authorization is an entry in the state registry of companies that do virtual-related business. It is maintained by the Chamber of Tax Administration.
The Gibraltar crypto license is a special permit to conduct activities in the field of virtual financial services, digital money wallet management and cryptocurrency exchange. The digital financial sector is legal. The Financial Services Commission (GFSC) regulates the work of firms in the industry.
In 2019, Singapore introduced the Payment Services Act (PSA). It established a license registration need for cryptocurrency activities. According to Singapore legislation, cryptocurrency is referred to as a digital payment token. The main regulatory body concerning cryptocurrency in Singapore is the Monetary Authority of Singapore (MAS). It is both a central bank and financial regulatory authority of Singapore.
There is no separate license for crypto activities in Сanada jurisdiction. The authorities decided to regulate such activities by issuing certain financial licenses. After obtaining a crypto license in Canada, the company is subject to supervision and control by regulatory authorities, such as the Financial Intelligence Unit of Canada (FINTRAC).
The services that the license permits
- Exchange of virtual currency for fiat currency;
- Fiat to virtual currency exchange;
- Exchange of virtual currency for another virtual currency;
- Custody of currency on behalf of your clients;
- Transfer of virtual currency between wallets;
- Storage of fiat currency on behalf of the client for a certain period of time for subsequent exchange for cryptocurrency*.
- The exchange between virtual currencies and fiat money (for example EUR to BTC or BTC to USD);
- Exchange between virtual currencies (for example BTC to LTC);
- Brokering in exchange;
- Keeping accounts related to crypto assets (custody services).
- The exchange between virtual assets and fiat currencies;
- The exchange between one or more forms of virtual assets;
- Transfer of virtual assets;
- Safekeeping and/or administration of virtual assets.
In Singapore, crypto providers fall under the payment service providers licensing regime. Under PSA, there are seven types of payment services. The group of crypto-related activities in Singapore is called digital payment token services.
Digital payment token services are services that:
Digital payment token services are services that:
- provide for the buying or selling of digital payment tokens,
- or provide a platform which facilitates the exchange of such digital payment tokens in Singapore.
- Exchanging cryptocurrencies with other cryptocurrencies;
- Exchanging cryptocurrencies with traditional fiat currencies;
- Managing cryptocurrency wallets for storing cryptocurrency assets;
- Development and provision of payment systems and services;
- Organization and management of cryptocurrency exchanges;
- Carrying out cryptocurrency transactions for third parties.
Requirements for UBO and directors
Must demonstrate the appropriate education of officials, their experience in this field of business, as well as the absence of a criminal record. Also, a local office is required. A local director and local AML officer in the company structure are required.
A local AML officer is not required. The director can do AML functions, but he should have special experience in virtual currency & AML activity and proof it with certificates, etc.
At least one director who must have an impeccable reputation and actively participate in the commercial activities of the company (no residence requirements).
Аt least 2 resident directors in the company's staff. Evidence of at least 2 years of experience in the core area for managers.
The company should provide information about directors. Including their professional experience, education and connection to the cryptocurrency industry.
Authorized capital
Cannot be less than 250,000 euros to offer virtual currency transfer services and 100,000 euros to offer virtual currency exchange services. In this case, the entire amount must be paid in cash.
5000 PLN (approx. 1100 EUR) – 100% of the amount to be paid at the time of registration.
Minimum share capital (paid-up) – 100 GBP (approx. 119 EUR) but it’s ultimately determined by the complexity of the crypto business model.
Equity capital requirements for a standard payment organization - S$100,000 (Singapore dollars) Equity requirements for a large payment organization - S$250,000 (Singapore dollars)
There is no minimum share capital for a Canadian crypto company.
Taxes
Income tax rate – 20%. 0% corporate tax if the profits are not distributed. Estonia has approximately 60 double-tax treaties.
Virtual currencies in Poland are subject to corporate tax (capital gains tax) at a rate of 19%, although taxation is possible at a preferential rate of 15%. Income tax on exchanging virtual currency for virtual or fiat currency ranges from 17% to 32% in accordance with a progressive tax scale.
Income derived by virtual currency service providers is taxed as per the usual corporate taxation rules. The corporate income tax rate in Gibraltar is 12.5%.
Income tax: Foreign and local companies are taxed at a flat rate of 17% on profits. Young companies are eligible for the exemption.
Federal rate: 15% to 33% depending on the amount of annual income. It is also worth considering the tax rate of the province where the cryptocurrency activity will be carried out.
License acquisition timeline
For those entrepreneurs that already have a resident legal entity and a bank account, the period for receiving will be 120 days from the day of filling up the Estonia cryptocurrency license register.
The process of obtaining a crypto license in Poland takes approx. 1.5 months.
Typically, a license is issued within 9 to 12 months.
The average time to get approval from the regulator is about 6-8 months.
Depends on many factors on average 3 months to a year
FAQ
How much does the crypto exchange license cost
Since the crypto exchange license cost varies due to many factors, it is impossible to give you a rough calculation of the fees. It could cost approximately from a few thousand euros to hundreds of thousands to obtain a license for crypto exchange.
Is cryptocurrency legal in Europe?
Cryptocurrencies are legal across the European Union with individual member-state regulations.
How to get a license for cryptocurrency?
To receive a crypto license, you must complete the following steps:
- Learn about local regulation and licensing categories.
- Create a detailed business strategy and the necessary paperwork.
- Submit your application to the appropriate regulatory body.
- Maintain strict AML/KYC, security, and financial controls.
- Regulators will evaluate your application.
- You can lawfully operate after you have been approved.
How much does it cost to obtain a crypto license?
The cost of obtaining a crypto license depends on the jurisdiction and the types of activities that the company plans to carry out; an individual offer is available upon request.
How long does it take to obtain a crypto license?
The timing of obtaining a cryptocurrency license also depends on the jurisdiction; it usually takes more time than just registering a legal entity. For example, on average, obtaining a crypto license in Estonia takes 2 to 6 months, including preparing and collecting the necessary documents.
What documents are needed to apply for a crypto license?
For example, in order to obtain an Estonian crypto license, you need to present a full package of documents on the registration of a legal entity. You also need a local director with a crystal clear business reputation. You will need to comply with anti-money laundering procedures and provide proof of the origin of the company’s funds and its owners. You need to carefully work out the privacy policy, terms of use of services, and protection of personal data. All this information should be publicly available on the company’s website.
How do I become a crypto broker?
To become a crypto broker, it is required to establish a company and obtain the required license. To obtain a license, the company should fit with paid-up capital requirements, professional staff, and AML & CFT policies. Moreover, the owner of the crypto broker should have a good reputation, a clear criminal record, and proof of funds according to the laws.
Which jurisdiction is the most favourable for the crypto business?
Most Crypto-Friendly Jurisdictions in 2023
- Singapore
- Poland
- Estonia
- Canada
- Gibraltar
Are there any taxes for cryptocurrency companies?
The acquisition of cryptocurrency is not taxable. The fact of acquiring cryptocurrency does not confirm the fact of making a profit. In case the company receives income from the services that they provide the taxation varies from country to country and other factors.
What is the validity period of a cryptocurrency license in Europe?
As a common rule, most countries allow licenses for an indefinite period of time.
Which agency regulates cryptocurrency companies in Europe?
National Authorities. Cryptocurrency regulations are often enforced at the national level by financial regulatory bodies or central banks. For example, in Germany, the Federal Financial Supervisory Authority (BaFin) regulates crypto-related activities. In France, the Autorité des Marchés Financiers (AMF) oversees certain aspects of the crypto sector. EBA Guidelines. The European Banking Authority (EBA) has issued guidelines related to the risks of cryptocurrencies. These guidelines provide recommendations to financial institutions on how to deal with crypto-assets. European Securities and Markets Authority (ESMA). ESMA is an independent EU authority. That works to enhance investor protection and promote stable and orderly financial markets. While ESMA doesn’t regulate cryptocurrencies, it does issue guidelines and warnings related to crypto-assets and initial coin offerings (ICOs).
What services does a licensed crypto broker provide?
A licensed crypto broker provides a range of services related to buying, selling, and trading cryptocurrencies for personal and corporate clients. Usually, the crypto broker provides the following services: Cryptocurrency Trading, Portfolio Management, Investment Advise, OTC Trading, Custodian Services, etc. The range of services depends on the broker type, market area, and jurisdiction.
What licensing rules and compliance laws apply to a crypto license?
Companies that received crypto licenses are automatically obliged to provide their activity according to the local and international laws which regulate activity in the cryptocurrency area. However, cryptocurrency activity is not regulated fully in all countries, so gaps in rules are possible in many states. MiCA regulations in the EU effectively influenced crypto market regulations, because highlighted the following principles for the providers of crypto assets:
- Meet the minimum authorized capital requirements
- To act honestly, fairly, and professionally in the interests of clients.
- Securely store crypto-assets and customer funds and prevent them from being used for your own purposes.
- To confirm the good reputation, and the appropriate level of skills and knowledge of the members of the management body.
- Ensure AML/CFT, service continuity, and data security policies
and procedures. - Establish effective complaints procedures.
- Implement an effective policy for the prevention of conflicts of interest.
The abovementioned requirements for crypto-licensed companies became a standard for crypto regulation, so these principles are also used in most crypto countries outside of the EU nowadays.
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