Labuan is one of the most favorable jurisdictions for entrepreneurial activities in the world in terms of taxation, including cryptocurrency companies. The team of experts at Gofaizen & Sherle is ready to assist in the process of registering a cryptocurrency company and obtaining a license for cryptocurrency operations in Labuan
Labuan is a federal territory in Malaysia that has become a popular destination for cryptocurrency companies. Thanks to its low taxation and favorable regulatory environment for businesses, Labuan provides an opportunity for cryptocurrency companies to provide their services in the country where they are registered. One of the key advantages for many digital asset entrepreneurs is low operating costs and full compliance with the legal system.
In 2018, the Labuan Financial Services Authority (LFSA) incorporated exchanges into its jurisdiction by granting them licensed offerings. An exchange is defined as a trading platform that gives digital asset owners the ability to post their offerings to investors and trade in a variety of ways: crypto to crypto, fiat to crypto, or vice versa.
In April 2019, Fusang Exchange, Asia's first fully licensed securities exchange specializing in digital assets, received approval from the LFSA.
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Over the past few years, Labuan authorities have stepped up efforts to regulate trading and exchange, so the cryptocurrency exchange has been licensed and officially recognized to attract customers and ensure sustainable business. In doing so, Labuan allows for international markets with a corporate tax rate of 3%, while the standard corporate tax rate in Malaysia is 24%.
The International Financial Center (IBFC) provides business structures for digital financial services (DFS) in Labuan. These include digital banking, business insurance, and digital intermediaries such as robo-advisors, digital asset exchanges, cryptocurrency trading platforms, blockchain tokens, and electronic payment systems.
Obtaining a cryptocurrency license in Labuan has many advantages:
The following qualified entities may obtain a license for a cryptocurrency exchange in Labuan:
Regulatory and regulatory requirements to obtain a cryptocurrency license in Labuan include:
Other regulatory requirements include:
The procedure for obtaining a license to exchange cryptocurrencies in Labuan includes the following steps:
Obtaining a license takes approximately 4 to 6 months.
It is important to note that the procedure for obtaining a license may vary depending on the specific requirements and policies of the regulatory agency. It is recommended to contact Gofaizen & Sherle legal advisors who specialize in cryptocurrency licenses for detailed information about the procedure and requirements.
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There are several key points and requirements to consider when doing accounting and auditing for cryptocurrency companies in Labuan:
Given the complexity of accounting and auditing for cryptocurrency companies, it is recommended that professional accountants and auditors who are familiar with Labuan's regulatory requirements and have experience in the crypto industry be engaged.
In Labuan, cryptocurrencies represent 21% of assets, the third most important in the Malaysian community, after real estate (44%) and gold (33%). A functioning cryptocurrency exchange is licensed and in legal status. The Labuan Financial Services Authority (LFSA) is the body responsible for regulating the financial industry and oversees cryptocurrency companies in Labuan. As such, cryptocurrency companies in Labuan are subject to the same laws and guidelines followed by other financial institutions operating in the region.
The main laws to which cryptocurrency exchanges are subject are:
Before engaging in DFS activities, organizations in Labuan are required to obtain prior approval from the LFSA. In addition, given the virtual and non-personal nature of DFS, the regulator pays special attention to anti-money laundering and counterterrorist financing (AML/CFT) compliance and market conduct. This is critical to ensure that DFS activities are not used to conceal illegal money laundering or terrorist financing schemes and to promote professionalism and transparency in customer relations services.
The taxation of cryptocurrency companies in Labuan is subject to the current tax laws and regulations in Malaysia. Labuan, as a jurisdiction, offers certain tax advantages to attract international business entities, including cryptocurrency companies.
Labuan's tax laws include:
A few key points regarding the taxation of cryptocurrency companies in Labuan:
It is important to note that tax regulations and policies can change over time, and cryptocurrency companies in Labuan need to stay up-to-date on the latest tax laws and consult with tax professionals.
Labuan has several types of licenses that may apply to cryptocurrency activities, such as a money broker license, a credit token license, or a digital asset and exchange (DAX) license. The specific license required for cryptocurrency activities will depend on the nature of the business.
The cost of obtaining a cryptocurrency license in Labuan usually includes various fees, which include:
Labuan has license fees that are payable by companies to obtain and maintain different types of licenses:
We recommend contacting our advisors for information on licensing fees in this area.