Crypto exchange license
Crypto license in Europe
The European Crypto License allows you to work legally in the EU, makes crypto-business transparent, and increases the trust of customers, partners, and state regulators. This is a promising direction for entrepreneurs engaged in cryptocurrency activities and understand the potential for developing this direction.
Before choosing the EU jurisdiction, you need to understand the nature of your project and the types of services you want. In most cases, you will need a Cryptocurrency Exchange License.
In European countries, the regulatory laws have a single scenario corresponding to the EU laws. However, in practice, they may differ significantly, especially in business models related to crypto-assets.
Of course, there are countries with more favorable licensing conditions than others. Let's look at the different jurisdictions in more detail.
Lithuania
In Lithuania, you can get 2 types of crypto licenses: a Cryptocurrency Exchange License and a Depository Currency Wallet License. In addition, you can request 2 types of licenses at the same time.
The Lithuanian government offers loyal conditions and a favorable financial environment for brokers. It has one of the lowest corporate taxes in the EU - 15%. The license is issued in a relatively short period.
Until recently, Lithuania had the most minimal requirements for companies. However, after tightening Estonian regulations, the government discovered the rapid growth of cryptocurrency companies from Estonia and decided to also tighten regulation of the crypto asset sector. It was decided to revise the AML law, to ensure maximum transparency and stricter regulation.
In addition, from 01.01.2023 the minimum registered capital increases from 2500Є to 125000Є additionally requires the presence of a senior manager resident of the country, previously all employees could have citizenship of other countries.
Czech Republic
Depending on the type of commercial activity of your company, the Czech crypto license is divided into 4 types: the classic exchange between virtual currencies, the activities of cryptocurrency exchanges and exchangers, the intermediation of cryptocurrency exchange for fiat, crypto business operation of the wallet service.
In April 2015, the National Bank Miroslav Singer governor registered a summary "Security of Internet Payments and Cryptocurrency". Based on the provisions of this document, EU laws apply to virtual currencies in the absence of restrictions from the laws of the Czech Republic. According to the Ministry of Finance, there will be no additional laws on cryptocurrency companies shortly.
In addition, there are several advantages of this license: income tax - of 5%, there are no residency requirements and there are no restrictions on working with Czech banks, which have very favorable rates of service, etc.
The requirements for companies are standard and comply with European standards, such as AML/KYC policies and business plans, opening a physical office, the impeccable reputation of the owners, reporting, and monitoring.
Poland
For legal cryptocurrency activities in Poland, you must register with the Cryptocurrency Registry, which covers the following services: exchange between virtual currencies, exchange of crypto to fiat, and maintenance and storage of funds in cryptocurrencies.
Poland is the first EU country where the government has legally recognized cryptocurrencies as an independent sphere of activity. The government has signed bilateral agreements with 84 global countries to avoid double taxation. Thus, the country has confirmed the status of a favorable jurisdiction for crypto-business from the taxation point of view.
On November 1, 2021, crypto-sector regulations came into force in Poland and the Cryptocurrency Registry was activated. Moreover, a company must meet relatively simple procedural requirements and the registration period is relatively short.
In Poland, not only government regulations and rules but also the EU directives on compliance with AML/CTF regulations apply. Crypto companies need to comply with generally accepted European regulatory standards. The minimum authorized capital is 5000 zlotys.
Slovakia
There can be 2 main types of cryptocurrency companies in Slovakia: LLC (Limited Liability Company), the amount of minimum authorized capital is 5000Є, and joint stock company with an authorized capital of 25000Є.
For the legal activity of cryptocurrency companies, there are 2 types of crypto licenses: license for the exchange of cryptocurrency and license for cryptocurrency wallet maintenance and storage.
The Slovak government has strict requirements for the regulation of cryptocurrency and a license for this activity. Anti-money laundering (AML) legislation and KYC regulations apply to regulation and licensing. In addition, all regulators are allowed access to corporate information.
In March 2018, Slovakia passed laws on cryptocurrency. Following these laws, all profits that were derived from cryptocurrency transactions fall under taxation.
Despite several strict rules, the Slovak crypto license remains attractive to investors: there are no citizenship requirements, no restrictions on capital flows, and no currency controls. The tax is 22%, but it can be reduced to 0.5% with an agent scheme and proper accounting.
Estonia
After the new Financial Intelligence Unit (FIU) regulations were introduced, several types of licenses were merged into one called "Virtual Service Provider". It covers the following types of cryptocurrency activities: cryptocurrency exchange, cryptocurrency wallet service, and crypto payment systems.
The Estonian licensing procedure came into force on March 10, 2020. According to the latest amendment to the Anti-Money Laundering and Counter-Terrorist Financing Act, all operating cryptocurrency companies, as well as those applying for a license, must provide the regulator with all necessary documentation, open a physical office and provide local management.
On December 23, 2021, the government approved a new bill to amend the AML law. The amount of authorized capital has increased significantly. Before the amendments it was 12000Є, now it is 100000Є for cryptocurrency wallet services and 2500000Є for crypto-asset exchange service providers.
These changes provide a high level of transparency and minimize risks, but complicate the licensing process, which has caused a large outflow of investors from Estonia to more loyal jurisdictions.
Сrypto exchange license in other jurisdictions
In addition to European crypto licenses, you can consider registering in other jurisdictions where the regulation and legal regime are different and there are certain advantages.
Canada
If you want to open a cryptocurrency business in Canada, an MSB license is required for legal activities. Companies with this type of license can perform the following financial transactions: crypto asset exchanges, cryptocurrency transfer services, and cryptocurrency wallet services.
As of 2017, cryptocurrency is regulated as securities. Accordingly, it falls under the "Securities Law", which also includes financial assets, stocks, bonds, ETFs, options, and investments.
Since March 2021, in a public notice by the CSA and IIROC (Canadian Investment Regulatory Organization), Canada has adopted its position in regulating cryptocurrency activity. The government sector ensures that all cryptocurrency exchanges and companies comply with the regulations.
At the same time, FinTRAC has issued guidance on inspecting entities, individuals, and companies that provide financial services to ensure compliance with AML/CFT rules. There are several advantages for Canadian license holders: no minimum authorized capital, a high level of economic freedom, access to a large-scale domestic market, a reliable banking system, and minimal regulatory costs.
UAE
Cryptocurrency exchange registration in the UAE is becoming an affordable and popular option due to the large number of free zones that allow businesses to trade and store cryptocurrency, process crypto assets, and engage in related activities.
The current government provides for regulated and unregulated activities of crypto companies. The requirements, conditions, and possibilities of the license depend on the chosen economic zone. You can get a crypto license in UAE in the following zones: DMCC, DAFZA, ADGM, and DWTC.
The UAE government recognizes the possible risks that are associated with crypto-assets: financial laundering and sponsorship of terrorism. Despite this factor, the UAE is a very attractive country for cryptocurrency businesses with the most loyal taxation, absence of import and export tax, full legalization of cryptocurrency, and other advantages.
Comparative table of crypto-regulation by jurisdictions 2022
- Time frames to acquire the license
- Cost of license
- State Duties
- Business Plan
- Local Company
- Cost of company registration
- Share Capital Requirement
- Local Physical Office
- Local AML Officer
- Local Employee
- Financial Audit
- Financial (Accounting) Reporting
Our Practice areas include
- Exchange of virtual values
- Online platform management
- Exchange between virtual values and fiat pairs
- Virtual values custody services
- Remittance of virtual values
- Escrow
- Staking
- Loans in virtual values backed with fiat currency
- NFT digital art auction
- Investment advises (trade signals)
- Mediation in the financial deals related to digital assets
- Capital management up to 500 million EUR
- Attract non-professional (retail) investors
- Manage a portfolio of virtual values
- Full data anonymity of fund investors
- Project research
- Token solution consulting
- Recommendations on the choice of jurisdiction
- Roadmap development
- Legal supporting documents preparation
- Internal research audit of the client’s project
- Examination of applicable legislation with respect to the project
- The legal conclusion/legal analysis of the case
We are working directly with the following regulators
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- Allows operate with 500 MEUR capital
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- 2-3 month to set up the infrastructure and acquire a license with low costs
- Electronic money emission
- Payment system management
- Money remittance
- Provision of loans (using equity capital only)
FAQ about crypto license
How to get a license for cryptocurrency?
There is no single algorithm that is suitable for all jurisdictions. The complexity and duration of obtaining a Crypto License depend on the current legislation and regulatory requirements of each country. If we gather the general requirements, they may concern a certain amount and liquidity of the authorized capital, legal form of business, the reputation of owners, legal address, bank account, compliance with AML/KYC rules, etc.
Different jurisdictions may have different state fees, application processing times, documentation packages, and special requirements.
Usually, it takes 1-6 months to review the application and the process of obtaining a license is as follows:
- Selecting a jurisdiction and registering a company.
- Opening a bank account.
- Selection of specialized employees.
- Preparation of technical equipment and software.
- Gathering and submitting documents required by regulators.
- Waiting for the crypto license application to be processed.
All entrepreneurs must study the requirements of local regulators, the country's legislation, AML/KYC rules, etc.
How much does a crypto-exchange license cost?
Like the licensing process, the cost of a legal permit also varies from jurisdiction to jurisdiction. There are relatively expensive permissions like in UAE from $15.000, and there are more budgetary permissions, for example in Estonia, the license costs from 4900Є. In addition, you need to consider the amount of registered capital, the cost of office rent and purchase of equipment, staff recruitment, state fees, software, etc.
To calculate the exact cost of opening a license for a cryptocurrency company in the desired jurisdiction - contact our lawyers for a detailed consultation.
Which jurisdiction is the most profitable for the crypto business?
Each jurisdiction has its advantages and pitfalls. Before opening a License for the exchange of cryptocurrency, it is necessary to study the legislation of the country to choose the best option. The choice may depend on the type of activity, financial capabilities of the company, and business plan.
If you are not ready to spend a lot of money to start a company, you can consider an Estonian license. If you are interested in free economic zones, and the rapid development of the cryptocurrency sector, and you are willing to overpay for these benefits - you will be fine to open a crypto-business in the UAE.
The Czech Republic is strictly regulated, but with the Czech license you can work in all EU countries, it provides more freedom in the variety of services offered and has several other advantages.
In many jurisdictions, there is a necessity for minimum charter capital, while in Canada it is not required at all. At the same time, the Canadian government has introduced a high tax rate of up to 33%.
Every situation is different and it is important to approach the issue constructively. To save time and finances - contact our specialists.
Is there any taxation for cryptocurrency companies?
Every year cryptocurrency becomes more regulated. And along with the regulations, comes taxation. Crypto assets are still part of a new industry, so not all countries have finally approved the mechanism of tax collection. However, this practice is present in almost every jurisdiction and may differ depending on the legislation of the country.
Let's look at some examples:
The UAE is a very attractive country on the tax side for cryptocurrency businesses that trade: the federal income and corporate tax rates are 0%. However, since the beginning of 2018, the government introduced new rules on the tax rate and it is 5%. Your company can be set up on a zero-tax basis, but regular transactions will be subject to 5% VAT.
Poland and Slovakia have a stricter tax system but have signed bilateral tax avoidance agreements with more than 70 countries.
In Canada, cryptocurrency activities may fall under the regulation of the Income Tax Act (ITA). The rate depends on the annual income: from 15 to 33%.
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